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Should You Buy Haynes International, Inc. (HAYN)?

Is Haynes International, Inc. (NASDAQ:HAYN) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Haynes International, Inc. (NASDAQ:HAYN) a great investment now? Money managers are betting on the stock. The number of long hedge fund positions improved by 2 recently. Our calculations also showed that HAYN isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the fresh hedge fund action surrounding Haynes International, Inc. (NASDAQ:HAYN).

How have hedgies been trading Haynes International, Inc. (NASDAQ:HAYN)?

At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HAYN over the last 16 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

No of Hedge Funds with HAYN Positions

More specifically, Royce & Associates was the largest shareholder of Haynes International, Inc. (NASDAQ:HAYN), with a stake worth $30.8 million reported as of the end of March. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $7.9 million. Millennium Management, GAMCO Investors, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Haynes International, Inc. (NASDAQ:HAYN). Marshall Wace LLP had $0.9 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.3 million position during the quarter.

Let’s check out hedge fund activity in other stocks similar to Haynes International, Inc. (NASDAQ:HAYN). We will take a look at Tower International Inc (NYSE:TOWR), Willdan Group, Inc. (NASDAQ:WLDN), Fidus Investment Corporation (NASDAQ:FDUS), and PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS). All of these stocks’ market caps are similar to HAYN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TOWR 9 32893 -4
WLDN 5 9498 -1
FDUS 5 11178 -3
PHAS 8 58573 4
Average 6.75 28036 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $49 million in HAYN’s case. Tower International Inc (NYSE:TOWR) is the most popular stock in this table. On the other hand Willdan Group, Inc. (NASDAQ:WLDN) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Haynes International, Inc. (NASDAQ:HAYN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on HAYN as the stock returned 13.5% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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