The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Harsco Corporation (NYSE:HSC).
Hedge fund interest in Harsco Corporation (NYSE:HSC) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Bandwidth Inc. (NASDAQ:BAND), MicroStrategy Incorporated (NASDAQ:MSTR), and eHealth, Inc. (NASDAQ:EHTH) to gather more data points. Our calculations also showed that HSC 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.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_340081" align="aligncenter" width="450"] Phill Gross of Adage Capital Management[/caption]
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. We're going to review the key hedge fund action encompassing Harsco Corporation (NYSE:HSC).
How have hedgies been trading Harsco Corporation (NYSE:HSC)?
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HSC over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Phill Gross and Robert Atchinson's Adage Capital Management has the biggest position in Harsco Corporation (NYSE:HSC), worth close to $51.1 million, corresponding to 0.1% of its total 13F portfolio. On Adage Capital Management's heels is Ken Grossman and Glen Schneider of SG Capital Management, with a $44.1 million position; the fund has 8.3% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Todd J. Kantor's Encompass Capital Advisors, Mark Coe's Intrinsic Edge Capital and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position SG Capital Management allocated the biggest weight to Harsco Corporation (NYSE:HSC), around 8.35% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, setting aside 4.24 percent of its 13F equity portfolio to HSC.
Because Harsco Corporation (NYSE:HSC) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds who sold off their full holdings in the third quarter. Interestingly, Richard Driehaus's Driehaus Capital dropped the biggest position of the 750 funds followed by Insider Monkey, comprising an estimated $15.8 million in stock, and Principal Global Investors's Columbus Circle Investors was right behind this move, as the fund dumped about $9.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Harsco Corporation (NYSE:HSC) but similarly valued. These stocks are Bandwidth Inc. (NASDAQ:BAND), MicroStrategy Incorporated (NASDAQ:MSTR), eHealth, Inc. (NASDAQ:EHTH), and The Michaels Companies, Inc. (NASDAQ:MIK). This group of stocks' market values are closest to HSC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAND,20,134079,2 MSTR,20,164593,3 EHTH,21,278384,-5 MIK,21,76221,-5 Average,20.5,163319,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $182 million in HSC's case. eHealth, Inc. (NASDAQ:EHTH) is the most popular stock in this table. On the other hand Bandwidth Inc. (NASDAQ:BAND) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Harsco Corporation (NYSE:HSC) is even less popular than BAND. Hedge funds clearly dropped the ball on HSC as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 HSC as the stock returned 17.4% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.