Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of HNI Corp (NYSE:HNI).
Is HNI Corp (NYSE:HNI) a good stock to buy now? Money managers are turning less bullish. The number of long hedge fund bets decreased by 5 recently. Our calculations also showed that HNI 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). HNI was in 15 hedge funds' portfolios at the end of the first quarter of 2020. There were 20 hedge funds in our database with HNI positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a multitude of methods market participants employ to size up publicly traded companies. Two of the most innovative methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can beat their index-focused peers by a superb amount (see the details here).
[caption id="attachment_26092" align="aligncenter" width="396"] Joel Greenblatt of Gotham Asset Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Now we're going to analyze the latest hedge fund action regarding HNI Corp (NYSE:HNI).
What have hedge funds been doing with HNI Corp (NYSE:HNI)?
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HNI over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in HNI Corp (NYSE:HNI) was held by D E Shaw, which reported holding $11.6 million worth of stock at the end of September. It was followed by AQR Capital Management with a $11.2 million position. Other investors bullish on the company included Citadel Investment Group, Arrowstreet Capital, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to HNI Corp (NYSE:HNI), around 0.65% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.25 percent of its 13F equity portfolio to HNI.
Judging by the fact that HNI Corp (NYSE:HNI) has witnessed a decline in interest from the smart money, logic holds that there was a specific group of money managers that decided to sell off their full holdings by the end of the first quarter. Interestingly, Minhua Zhang's Weld Capital Management dumped the largest stake of all the hedgies followed by Insider Monkey, comprising close to $1.2 million in stock, and Brandon Haley's Holocene Advisors was right behind this move, as the fund dumped about $0.9 million worth. These moves are interesting, as total hedge fund interest dropped by 5 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks similar to HNI Corp (NYSE:HNI). These stocks are Tennant Company (NYSE:TNC), Six Flags Entertainment Corp (NYSE:SIX), Asbury Automotive Group, Inc. (NYSE:ABG), and Heron Therapeutics Inc (NASDAQ:HRTX). This group of stocks' market valuations match HNI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TNC,11,89348,0 SIX,30,240206,-8 ABG,19,248518,-5 HRTX,19,223346,0 Average,19.75,200355,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $47 million in HNI's case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Tennant Company (NYSE:TNC) is the least popular one with only 11 bullish hedge fund positions. HNI Corp (NYSE:HNI) 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. 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately HNI wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HNI investors were disappointed as the stock returned 17% during the second quarter 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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