Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Houlihan Lokey Inc (NYSE:HLI) from the perspective of those successful funds.
Is Houlihan Lokey Inc (NYSE:HLI) a superb investment right now? The smart money is altogether becoming hopeful. The number of bullish hedge fund bets inched up by 2 in recent months. At the end of this article we will also compare HLI to other stocks including OM Asset Management PLC (NYSE:OMAM), ExlService Holdings, Inc. (NASDAQ:EXLS), and USANA Health Sciences, Inc. (NYSE:USNA) 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.
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How have hedgies been trading Houlihan Lokey Inc (NYSE:HLI)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 25% rise from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in HLI at the beginning of this year, so hedge fund ownership is still down by nearly 20% in 2016. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John W. Rogers’ Ariel Investments has the biggest position in Houlihan Lokey Inc (NYSE:HLI), worth close to $26.4 million. The second largest stake is held by Chuck Royce of Royce & Associates, with a $7.8 million position. Other peers that are bullish encompass Millennium Management, one of the 10 largest hedge funds in the world, Gunnar Overstrom’s Three Corner Global Investors, and Matthew Lindenbaum’s Basswood Capital. 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.
Now, key money managers have jumped into Houlihan Lokey Inc (NYSE:HLI) headfirst. Royce & Associates created the largest position in Houlihan Lokey Inc (NYSE:HLI). Jim Simons’ Renaissance Technologies also initiated a $0.7 million position during the quarter. The only other fund with a new position in the stock is Ken Griffin’s Citadel Investment Group.
Let’s go over hedge fund activity in other stocks similar to Houlihan Lokey Inc (NYSE:HLI). We will take a look at OM Asset Management PLC (NYSE:OMAM), ExlService Holdings, Inc. (NASDAQ:EXLS), USANA Health Sciences, Inc. (NYSE:USNA), and Core-Mark Holding Company, Inc. (NASDAQ:CORE). All of these stocks’ market caps are similar to HLI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OMAM | 12 | 63974 | 1 |
| EXLS | 8 | 56257 | -5 |
| USNA | 14 | 142282 | 1 |
| CORE | 14 | 57732 | -3 |
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 $80 million. That figure was $56 million in HLI’s case. USANA Health Sciences, Inc. (NYSE:USNA) is the most popular stock in this table. On the other hand ExlService Holdings, Inc. (NASDAQ:EXLS) is the least popular one with only 8 bullish hedge fund positions. Houlihan Lokey Inc (NYSE:HLI) 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 USNA might be a better candidate to consider taking a long position in.
Disclosure: None
