Where Do Hedge Funds Stand On HD Supply Holdings Inc (HDS)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on HD Supply Holdings Inc (NASDAQ:HDS).

HD Supply Holdings Inc (NASDAQ:HDS) has experienced a decrease in enthusiasm from smart money recently. HD Supply Holdings Inc (NASDAQ:HDS) was in 41 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 55. There were 44 hedge funds in our database with HDS holdings at the end of June. Our calculations also showed that HDS isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Seth Klarman of Baupost Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a peek at the key hedge fund action encompassing HD Supply Holdings Inc (NASDAQ:HDS).

Do Hedge Funds Think HDS Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HDS over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Seth Klarman’s Baupost Group has the number one position in HD Supply Holdings Inc (NASDAQ:HDS), worth close to $281.2 million, accounting for 3% of its total 13F portfolio. Coming in second is David Cohen and Harold Levy of Iridian Asset Management, with a $170.9 million position; the fund has 3.7% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Ricky Sandler’s Eminence Capital, D. E. Shaw’s D E Shaw and Anthony Bozza’s Lakewood Capital Management. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to HD Supply Holdings Inc (NASDAQ:HDS), around 16.73% of its 13F portfolio. Impactive Capital is also relatively very bullish on the stock, designating 15.36 percent of its 13F equity portfolio to HDS.

Seeing as HD Supply Holdings Inc (NASDAQ:HDS) has experienced falling interest from hedge fund managers, we can see that there exists a select few hedgies that elected to cut their full holdings heading into Q4. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest investment of the 750 funds followed by Insider Monkey, worth about $8.2 million in stock, and George McCabe’s Portolan Capital Management was right behind this move, as the fund said goodbye to about $2.4 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as HD Supply Holdings Inc (NASDAQ:HDS) but similarly valued. These stocks are Carlisle Companies, Inc. (NYSE:CSL), GrubHub Inc (NYSE:GRUB), Lamar Advertising Company (REIT) (NASDAQ:LAMR), Dolby Laboratories, Inc. (NYSE:DLB), Novavax, Inc. (NASDAQ:NVAX), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), and Athene Holding Ltd. (NYSE:ATH). This group of stocks’ market values match HDS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSL 28 191780 -10
GRUB 49 1607648 -3
LAMR 37 380864 -7
DLB 35 596301 7
NVAX 36 611401 18
IONS 25 312130 2
ATH 31 853235 -2
Average 34.4 650480 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.4 hedge funds with bullish positions and the average amount invested in these stocks was $650 million. That figure was $1195 million in HDS’s case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) is the least popular one with only 25 bullish hedge fund positions. HD Supply Holdings Inc (NASDAQ:HDS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HDS is 57.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on HDS as the stock returned 35.5% since the end of Q3 (through 12/14) 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.