Was The Smart Money Right About Hanger, Inc. (HNGR)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we are going to take a closer look at the smart money sentiment towards Hanger, Inc. (NYSE:HNGR).

Is Hanger, Inc. (NYSE:HNGR) a bargain? The best stock pickers are getting less bullish. The number of long hedge fund bets retreated by 1 in recent months. Our calculations also showed that HNGR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). HNGR was in 15 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with HNGR positions at the end of the previous quarter.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Joe Huber - Huber Capital Management

Joe Huber of Huber Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action encompassing Hanger, Inc. (NYSE:HNGR).

How are hedge funds trading Hanger, Inc. (NYSE:HNGR)?

Heading into the first quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HNGR over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Hanger, Inc. (NYSE:HNGR) was held by SCW Capital Management, which reported holding $31.5 million worth of stock at the end of September. It was followed by Cannell Capital with a $17.7 million position. Other investors bullish on the company included Renaissance Technologies, Ariel Investments, and Huber Capital Management. In terms of the portfolio weights assigned to each position SCW Capital Management allocated the biggest weight to Hanger, Inc. (NYSE:HNGR), around 18.74% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, dishing out 5.74 percent of its 13F equity portfolio to HNGR.

Due to the fact that Hanger, Inc. (NYSE:HNGR) has witnessed falling interest from the smart money, we can see that there is a sect of hedgies that slashed their positions entirely heading into Q4. At the top of the heap, Richard C. Patton’s Courage Capital dumped the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $24.4 million in stock. Lawrence Hawkins’s fund, Prosight Capital, also said goodbye to its stock, about $8.1 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hanger, Inc. (NYSE:HNGR) but similarly valued. These stocks are OneSpaWorld Holdings Limited (NASDAQ:OSW), Five Point Holdings, LLC (NYSE:FPH), MAG Silver Corporation (NYSE:MAG), and Bain Capital Specialty Finance, Inc. (NYSE:BCSF). This group of stocks’ market caps are closest to HNGR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OSW 11 114086 3
FPH 15 216718 1
MAG 10 45280 -2
BCSF 8 40264 1
Average 11 104087 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $82 million in HNGR’s case. Five Point Holdings, LLC (NYSE:FPH) is the most popular stock in this table. On the other hand Bain Capital Specialty Finance, Inc. (NYSE:BCSF) is the least popular one with only 8 bullish hedge fund positions. Hanger, Inc. (NYSE:HNGR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately HNGR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HNGR were disappointed as the stock returned -37.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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