The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought H&R Block, Inc. (NYSE:HRB) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is H&R Block, Inc. (NYSE:HRB) ready to rally soon? The smart money was getting more bullish. The number of bullish hedge fund positions rose by 5 recently. H&R Block, Inc. (NYSE:HRB) was in 24 hedge funds' portfolios at the end of June. The all time high for this statistics is 44. Our calculations also showed that HRB isn't among the 30 most popular stocks among hedge funds (click for Q2 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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind let's take a peek at the new hedge fund action surrounding H&R Block, Inc. (NYSE:HRB).
What have hedge funds been doing with H&R Block, Inc. (NYSE:HRB)?
At Q2's end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from the first quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in HRB a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in H&R Block, Inc. (NYSE:HRB) was held by D E Shaw, which reported holding $57.7 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $31.6 million position. Other investors bullish on the company included AQR Capital Management, Polaris Capital Management, and Carlson Capital. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to H&R Block, Inc. (NYSE:HRB), around 1.32% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, earmarking 0.7 percent of its 13F equity portfolio to HRB.
Consequently, specific money managers were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in H&R Block, Inc. (NYSE:HRB). Arrowstreet Capital had $31.6 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also initiated a $3 million position during the quarter. The other funds with brand new HRB positions are Brandon Haley's Holocene Advisors, Greg Poole's Echo Street Capital Management, and Jinghua Yan's TwinBeech Capital.
Let's now review hedge fund activity in other stocks similar to H&R Block, Inc. (NYSE:HRB). These stocks are Cushman & Wakefield plc (NYSE:CWK), LivePerson, Inc. (NASDAQ:LPSN), Echostar Corporation (NASDAQ:SATS), WNS (Holdings) Limited (NYSE:WNS), El Paso Electric Company (NYSE:EE), EnerSys (NYSE:ENS), and Watts Water Technologies Inc (NYSE:WTS). This group of stocks' market caps are similar to HRB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CWK,17,101994,2 LPSN,23,220073,8 SATS,29,394762,5 WNS,20,230288,3 EE,15,248090,-8 ENS,26,109145,10 WTS,25,250368,6 Average,22.1,222103,3.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $222 million. That figure was $207 million in HRB's case. Echostar Corporation (NASDAQ:SATS) is the most popular stock in this table. On the other hand El Paso Electric Company (NYSE:EE) is the least popular one with only 15 bullish hedge fund positions. H&R Block, Inc. (NYSE:HRB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HRB is 58.5. 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 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on HRB as the stock returned 8.9% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Get real-time email alerts: Follow H&r Block Inc (NYSE:HRB)
Disclosure: None. This article was originally published at Insider Monkey.