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Should You Avoid Hill-Rom Holdings, Inc. (HRC)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Hill-Rom Holdings, Inc. (NYSE:HRC)? The smart money sentiment can provide an answer to this question.

Hill-Rom Holdings, Inc. (NYSE:HRC) investors should be aware of a decrease in hedge fund sentiment of late. Our calculations also showed that HRC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are dozens of metrics market participants have at their disposal to evaluate their holdings. A pair of the less known metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can beat the S&P 500 by a solid amount (see the details here).

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the fresh hedge fund action encompassing Hill-Rom Holdings, Inc. (NYSE:HRC).

What does smart money think about Hill-Rom Holdings, Inc. (NYSE:HRC)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HRC over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with HRC Positions

More specifically, Select Equity Group was the largest shareholder of Hill-Rom Holdings, Inc. (NYSE:HRC), with a stake worth $269 million reported as of the end of September. Trailing Select Equity Group was Fisher Asset Management, which amassed a stake valued at $105.4 million. Millennium Management, Polar Capital, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to Hill-Rom Holdings, Inc. (NYSE:HRC), around 1.82% of its portfolio. Sectoral Asset Management is also relatively very bullish on the stock, earmarking 1.6 percent of its 13F equity portfolio to HRC.

Judging by the fact that Hill-Rom Holdings, Inc. (NYSE:HRC) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds that elected to cut their entire stakes heading into Q4. Interestingly, Steve Cohen’s Point72 Asset Management dropped the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $1.5 million in call options. Israel Englander’s fund, Millennium Management, also dropped its call options, about $1.1 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hill-Rom Holdings, Inc. (NYSE:HRC) but similarly valued. We will take a look at Axalta Coating Systems Ltd (NYSE:AXTA), Gentex Corporation (NASDAQ:GNTX), Five Below Inc (NASDAQ:FIVE), and Hexcel Corporation (NYSE:HXL). All of these stocks’ market caps resemble HRC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AXTA 56 2298717 15
GNTX 28 468671 5
FIVE 34 469205 -4
HXL 26 122315 3
Average 36 839727 4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $840 million. That figure was $663 million in HRC’s case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand Hexcel Corporation (NYSE:HXL) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Hill-Rom Holdings, Inc. (NYSE:HRC) is even less popular than HXL. Hedge funds dodged a bullet by taking a bearish stance towards HRC. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HRC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HRC investors were disappointed as the stock returned 1.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

Disclosure: None. This article was originally published at Insider Monkey.

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