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Should I Buy Hillenbrand, Inc. (HI)?

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Reymerlyn Martin
·6 min read
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In this article we will take a look at whether hedge funds think Hillenbrand, Inc. (NYSE:HI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Should we buy Hillenbrand (HI)? Hillenbrand, Inc. (NYSE:HI) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 25. HI has experienced an increase in enthusiasm from smart money recently. There were 12 hedge funds in our database with HI holdings at the end of June. Our calculations also showed that HI 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Siegel of Two Sigma Advisors
David Siegel of Two Sigma Advisors

David Siegel of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we're going to review the key hedge fund action encompassing Hillenbrand, Inc. (NYSE:HI).

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

At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in HI over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Hillenbrand, Inc. (NYSE:HI) was held by Adage Capital Management, which reported holding $69.4 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $8 million position. Other investors bullish on the company included Skylands Capital, Millennium Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to Hillenbrand, Inc. (NYSE:HI), around 0.84% of its 13F portfolio. Adage Capital Management is also relatively very bullish on the stock, designating 0.17 percent of its 13F equity portfolio to HI.

As aggregate interest increased, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, created the most valuable position in Hillenbrand, Inc. (NYSE:HI). Balyasny Asset Management had $1.5 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $1.5 million investment in the stock during the quarter. The other funds with brand new HI positions are Noam Gottesman's GLG Partners, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Jonathan Soros's JS Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Hillenbrand, Inc. (NYSE:HI) but similarly valued. These stocks are Wolverine World Wide, Inc. (NYSE:WWW), Gibraltar Industries Inc (NASDAQ:ROCK), Telephone & Data Systems, Inc. (NYSE:TDS), The Simply Good Foods Company (NASDAQ:SMPL), Outfront Media Inc (NYSE:OUT), Renewable Energy Group Inc (NASDAQ:REGI), and Taro Pharmaceutical Industries Ltd. (NYSE:TARO). This group of stocks' market values are similar to HI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WWW,17,76062,0 ROCK,19,135252,5 TDS,27,205879,6 SMPL,21,151318,-5 OUT,36,571888,-2 REGI,30,139635,9 TARO,9,59707,-1 Average,22.7,191392,1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $93 million in HI's case. Outfront Media Inc (NYSE:OUT) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 9 bullish hedge fund positions. Hillenbrand, Inc. (NYSE:HI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HI is 33.1. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on HI as the stock returned 39.5% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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

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