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Were Hedge Funds Right About Warming Up To Hooker Furniture Corporation (HOFT)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Hooker Furniture Corporation (NASDAQ:HOFT) and determine whether the smart money was really smart about this stock.

Hooker Furniture Corporation (NASDAQ:HOFT) was in 10 hedge funds’ portfolios at the end of the first quarter of 2020. HOFT has experienced an increase in enthusiasm from smart money lately. There were 9 hedge funds in our database with HOFT positions at the end of the previous quarter. Our calculations also showed that HOFT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the fresh hedge fund action surrounding Hooker Furniture Corporation (NASDAQ:HOFT).

What does smart money think about Hooker Furniture Corporation (NASDAQ:HOFT)?

At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in HOFT over the last 18 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is HOFT A Good Stock To Buy?

More specifically, Pzena Investment Management was the largest shareholder of Hooker Furniture Corporation (NASDAQ:HOFT), with a stake worth $25.3 million reported as of the end of September. Trailing Pzena Investment Management was Royce & Associates, which amassed a stake valued at $17.4 million. Arrowstreet Capital, Renaissance Technologies, and Millennium 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 Zebra Capital Management allocated the biggest weight to Hooker Furniture Corporation (NASDAQ:HOFT), around 0.46% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.24 percent of its 13F equity portfolio to HOFT.

Consequently, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in Hooker Furniture Corporation (NASDAQ:HOFT). Marshall Wace LLP had $0.2 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Hooker Furniture Corporation (NASDAQ:HOFT). We will take a look at ChoiceOne Financial Services, Inc. (NASDAQ:COFS), Venator Materials PLC (NYSE:VNTR), Golden Entertainment Inc (NASDAQ:GDEN), and Scorpio Bulkers Inc (NYSE:SALT). This group of stocks’ market caps match HOFT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COFS 2 1143 2
VNTR 11 23501 -6
GDEN 13 35561 -3
SALT 9 10108 -5
Average 8.75 17578 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $52 million in HOFT’s case. Golden Entertainment Inc (NASDAQ:GDEN) is the most popular stock in this table. On the other hand ChoiceOne Financial Services, Inc. (NASDAQ:COFS) is the least popular one with only 2 bullish hedge fund positions. Hooker Furniture Corporation (NASDAQ:HOFT) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on HOFT as the stock returned 25.7% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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