Is H&R Block, Inc. (HRB) Going to Burn These Hedge Funds?
At Insider Monkey we follow around 700 of the best-performing investors and even though many of them lost money in the last couple of months (70% of hedge funds lost money in October whereas S&P 500 ETF lost about 7%), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
H&R Block, Inc. (NYSE:HRB) investors should pay attention to a decrease in enthusiasm from smart money in recent months. Our calculations also showed that HRB isn't among the 30 most popular stocks among hedge funds.
In the financial world there are dozens of tools stock market investors can use to evaluate their holdings. A pair of the less utilized tools are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outpace the broader indices by a solid amount (see the details here).
Let's review the recent hedge fund action surrounding H&R Block, Inc. (NYSE:HRB).
How have hedgies been trading H&R Block, Inc. (NYSE:HRB)?
At Q3's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the second quarter of 2018. By comparison, 20 hedge funds held shares or bullish call options in HRB heading into this year. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in H&R Block, Inc. (NYSE:HRB), which was worth $42.5 million at the end of the third quarter. On the second spot was D E Shaw which amassed $32.5 million worth of shares. Moreover, GAMCO Investors, Millennium Management, and Citadel Investment Group were also bullish on H&R Block, Inc. (NYSE:HRB), allocating a large percentage of their portfolios to this stock.
Since H&R Block, Inc. (NYSE:HRB) has faced declining sentiment from the aggregate hedge fund industry, it's easy to see that there was a specific group of hedgies who sold off their full holdings in the third quarter. Interestingly, Alexander Mitchell's Scopus Asset Management cut the largest investment of all the hedgies followed by Insider Monkey, worth about $10.3 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also cut its stock, about $8.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as H&R Block, Inc. (NYSE:HRB) but similarly valued. We will take a look at Williams-Sonoma, Inc. (NYSE:WSM), Exelixis, Inc. (NASDAQ:EXEL), Janus Henderson Group plc (NYSE:JHG), and Centrais Elétricas Brasileiras S.A. - Eletrobras (NYSE:EBR). This group of stocks' market valuations are closest to HRB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WSM,23,560651,1 EXEL,23,679477,-1 JHG,17,183270,4 EBR,4,4967,1 Average,16.75,357091,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $357 million. That figure was $183 million in HRB's case. Williams-Sonoma, Inc. (NYSE:WSM) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. - Eletrobras (NYSE:EBR) is the least popular one with only 4 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard WSM might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
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