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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is HCI Group Inc (NYSE:HCI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is HCI a good stock to buy now? HCI Group Inc (NYSE:HCI) shareholders have witnessed a decrease in support from the world's most elite money managers of late. HCI Group Inc (NYSE:HCI) was in 10 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 14. There were 11 hedge funds in our database with HCI holdings at the end of June. Our calculations also showed that HCI 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.
To most investors, hedge funds are viewed as underperforming, old financial tools of yesteryear. While there are more than 8000 funds trading at present, Our researchers hone in on the leaders of this group, approximately 850 funds. It is estimated that this group of investors administer the lion's share of the hedge fund industry's total asset base, and by watching their finest stock picks, Insider Monkey has formulated various investment strategies that have historically outperformed the S&P 500 index. 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 March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Michael Gelband of ExodusPoint Capital
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. With all of this in mind we're going to review the recent hedge fund action regarding HCI Group Inc (NYSE:HCI).
Do Hedge Funds Think HCI Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HCI over the last 21 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in HCI Group Inc (NYSE:HCI) was held by Renaissance Technologies, which reported holding $11 million worth of stock at the end of September. It was followed by Royce & Associates with a $9.3 million position. Other investors bullish on the company included GLG Partners, Yost Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to HCI Group Inc (NYSE:HCI), around 2.28% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to HCI.
Judging by the fact that HCI Group Inc (NYSE:HCI) has witnessed falling interest from hedge fund managers, it's easy to see that there were a few hedge funds that elected to cut their full holdings heading into Q4. It's worth mentioning that Israel Englander's Millennium Management cut the biggest position of all the hedgies monitored by Insider Monkey, totaling an estimated $0.6 million in stock. Michael Gelband's fund, ExodusPoint Capital, also sold off its stock, about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to HCI Group Inc (NYSE:HCI). We will take a look at Kaleido BioSciences, Inc. (NASDAQ:KLDO), Newtek Business Services Corp (NASDAQ:NEWT), Hingham Institution for Savings (NASDAQ:HIFS), Grid Dynamics Holdings, Inc. (NASDAQ:GDYN), Marinus Pharmaceuticals Inc (NASDAQ:MRNS), Franklin Street Properties Corp. (NYSE:FSP), and Designer Brands Inc. (NYSE:DBI). This group of stocks' market values resemble HCI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KLDO,2,8819,-5 NEWT,4,7684,-2 HIFS,1,4806,0 GDYN,13,35812,-3 MRNS,13,148999,-5 FSP,15,18823,2 DBI,13,48775,-6 Average,8.7,39103,-2.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $32 million in HCI's case. Franklin Street Properties Corp. (NYSE:FSP) is the most popular stock in this table. On the other hand Hingham Institution for Savings (NASDAQ:HIFS) is the least popular one with only 1 bullish hedge fund positions. HCI Group Inc (NYSE:HCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HCI is 57.6. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 16.2 percentage points. Unfortunately HCI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HCI were disappointed as the stock returned 7.4% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.