We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Haynes International, Inc. (NASDAQ:HAYN) based on that data.
Haynes International, Inc. (NASDAQ:HAYN) investors should be aware of a decrease in hedge fund interest recently. HAYN was in 9 hedge funds' portfolios at the end of March. There were 14 hedge funds in our database with HAYN holdings at the end of the previous quarter. Our calculations also showed that HAYN isn't among the 30 most popular stocks among hedge funds (click for Q1 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 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 S&P 500 ETFs by 58 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 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_30621" align="aligncenter" width="392"] Cliff Asness of AQR Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's review the latest hedge fund action surrounding Haynes International, Inc. (NASDAQ:HAYN).
What have hedge funds been doing with Haynes International, Inc. (NASDAQ:HAYN)?
Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HAYN over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce's Royce & Associates has the largest position in Haynes International, Inc. (NASDAQ:HAYN), worth close to $16 million, accounting for 0.2% of its total 13F portfolio. On Royce & Associates's heels is Renaissance Technologies, with a $9.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions comprise Cliff Asness's AQR Capital Management, Paul Marshall and Ian Wace's Marshall Wace LLP and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Haynes International, Inc. (NASDAQ:HAYN), around 0.22% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to HAYN.
Because Haynes International, Inc. (NASDAQ:HAYN) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few money managers that decided to sell off their positions entirely by the end of the first quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the biggest position of all the hedgies followed by Insider Monkey, totaling close to $0.7 million in stock. Israel Englander's fund, Millennium Management, also dropped its stock, about $0.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 5 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Haynes International, Inc. (NASDAQ:HAYN) but similarly valued. We will take a look at Koppers Holdings Inc. (NYSE:KOP), Kraton Corporation (NYSE:KRA), TransMedics Group, Inc. (NASDAQ:TMDX), and Oppenheimer Holdings Inc. (NYSE:OPY). This group of stocks' market valuations match HAYN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KOP,12,9639,-3 KRA,14,22813,-5 TMDX,3,48101,-2 OPY,9,22234,1 Average,9.5,25697,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $33 million in HAYN's case. Kraton Corporation (NYSE:KRA) is the most popular stock in this table. On the other hand TransMedics Group, Inc. (NASDAQ:TMDX) is the least popular one with only 3 bullish hedge fund positions. Haynes International, Inc. (NASDAQ:HAYN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately HAYN wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HAYN investors were disappointed as the stock returned 13% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.