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Should You Buy Heartland Financial USA Inc (HTLF)?

Debasis Saha

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Heartland Financial USA Inc (NASDAQ:HTLF) was in 9 hedge funds' portfolios at the end of September. HTLF has seen an increase in enthusiasm from smart money in recent months. There were 8 hedge funds in our database with HTLF positions at the end of the previous quarter. Our calculations also showed that HTLF isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

In the eyes of most traders, hedge funds are assumed to be underperforming, outdated investment tools of the past. While there are over 8000 funds trading at present, We look at the elite of this club, about 750 funds. These hedge fund managers direct bulk of all hedge funds' total asset base, and by keeping track of their best investments, Insider Monkey has spotted numerous investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]

RENAISSANCE TECHNOLOGIES
RENAISSANCE TECHNOLOGIES

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's analyze the key hedge fund action encompassing Heartland Financial USA Inc (NASDAQ:HTLF).

What have hedge funds been doing with Heartland Financial USA Inc (NASDAQ:HTLF)?

Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2019. By comparison, 6 hedge funds held shares or bullish call options in HTLF a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is HTLF A Good Stock To Buy?
Is HTLF A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Heartland Financial USA Inc (NASDAQ:HTLF), which was worth $7.5 million at the end of the third quarter. On the second spot was Millennium Management which amassed $6.8 million worth of shares. Marshall Wace, Citadel Investment Group, and Two Sigma Advisors 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 Quantinno Capital allocated the biggest weight to Heartland Financial USA Inc (NASDAQ:HTLF), around 0.16% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to HTLF.

As one would reasonably expect, key money managers have been driving this bullishness. D E Shaw, managed by David E. Shaw, assembled the biggest position in Heartland Financial USA Inc (NASDAQ:HTLF). D E Shaw had $0.8 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also initiated a $0.5 million position during the quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Heartland Financial USA Inc (NASDAQ:HTLF) but similarly valued. We will take a look at NIO Inc. (NYSE:NIO), Bloomin' Brands Inc (NASDAQ:BLMN), Provident Financial Services, Inc. (NYSE:PFS), and Mueller Industries, Inc. (NYSE:MLI). All of these stocks' market caps are similar to HTLF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NIO,13,31011,-1 BLMN,18,250574,-4 PFS,11,55738,0 MLI,18,185815,3 Average,15,130785,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $25 million in HTLF's case. Bloomin' Brands Inc (NASDAQ:BLMN) is the most popular stock in this table. On the other hand Provident Financial Services, Inc. (NYSE:PFS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Heartland Financial USA Inc (NASDAQ:HTLF) is even less popular than PFS. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on HTLF, though not to the same extent, as the stock returned 5.9% during the fourth quarter (through 11/30) and outperformed the market as well.

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

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