Should You Add Hawaiian Telcom HoldCo Inc (HCOM) to Your Portfolio?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge funds have been producing disappointing net returns in recent years, however that was partly due to the poor performance of small-cap stocks in general. Well, small-cap stocks finally turned the corner and have been beating the large-cap stocks by more than 10 percentage points over the last 5 months.This means the relevancy of hedge funds’ public filings became inarguable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Hawaiian Telcom HoldCo Inc (NASDAQ:HCOM).

Hawaiian Telcom HoldCo Inc (NASDAQ:HCOM) investors should be aware of a decrease in enthusiasm from smart money in recent months. HCOM was in 7 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with HCOM positions at the end of the previous quarter. At the end of this article we will also compare HCOM to other stocks including Nobilis Health Corp (NYSEMKT:HLTH), Beigene Ltd (ADR) (NASDAQ:BGNE), and Chimerix Inc (NASDAQ:CMRX) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What does the smart money think about Hawaiian Telcom HoldCo Inc (NASDAQ:HCOM)?

Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a fall of 22% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in HCOM heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Nelson Obus’ Wynnefield Capital has the number one position in Hawaiian Telcom HoldCo Inc (NASDAQ:HCOM), worth close to $10.8 million, amounting to 3.6% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, one of the largest hedge funds in the world, with a $7.8 million position. Remaining peers that are bullish consist of Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Due to the fact that Hawaiian Telcom HoldCo Inc (NASDAQ:HCOM) has sustained a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of funds who sold off their full holdings last quarter. Interestingly, Willem Mesdag’s Red Mountain Capital sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling about $1.4 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund said goodbye to about $0.3 million worth of shares.

Let’s go over hedge fund activity in other stocks similar to Hawaiian Telcom HoldCo Inc (NASDAQ:HCOM). These stocks are Nobilis Health Corp (NYSEMKT:HLTH), Beigene Ltd (ADR) (NASDAQ:BGNE), Chimerix Inc (NASDAQ:CMRX), and Capitol Acquisition Corp III (NASDAQ:CLACU). This group of stocks’ market caps match HCOM’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $21 million in HCOM’s case. Beigene Ltd (ADR) (NASDAQ:BGNE) is the most popular stock in this table. On the other hand Nobilis Health Corp (NYSEMKT:HLTH) is the least popular one with only 6 bullish hedge fund positions. Hawaiian Telcom HoldCo Inc (NASDAQ:HCOM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BGNE might be a better candidate to consider taking a long position in.

Disclosure: None