In this article you are going to find out whether hedge funds think Heritage Insurance Holdings Inc (NYSE:HRTG) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Heritage Insurance Holdings Inc (NYSE:HRTG) a first-rate investment today? Prominent investors are getting less bullish. The number of long hedge fund bets were trimmed by 1 in recent months. Our calculations also showed that HRTG 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). HRTG was in 7 hedge funds' portfolios at the end of the first quarter of 2020. There were 8 hedge funds in our database with HRTG positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_746830" align="aligncenter" width="399"] Matthew Hulsizer of PEAK6 Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's analyze the key hedge fund action regarding Heritage Insurance Holdings Inc (NYSE:HRTG).
What have hedge funds been doing with Heritage Insurance Holdings Inc (NYSE:HRTG)?
Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HRTG over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Heritage Insurance Holdings Inc (NYSE:HRTG), which was worth $10.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $4.9 million worth of shares. AQR Capital Management, Citadel Investment Group, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Heritage Insurance Holdings Inc (NYSE:HRTG), around 0.15% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to HRTG.
Seeing as Heritage Insurance Holdings Inc (NYSE:HRTG) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there were a few funds that slashed their full holdings by the end of the first quarter. Intriguingly, Brian Ashford-Russell and Tim Woolley's Polar Capital cut the largest investment of the 750 funds followed by Insider Monkey, worth about $11.3 million in stock, and Daniel Johnson's Gillson Capital was right behind this move, as the fund dumped about $2.9 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Heritage Insurance Holdings Inc (NYSE:HRTG) but similarly valued. We will take a look at Hingham Institution for Savings (NASDAQ:HIFS), Tristate Capital Holdings Inc (NASDAQ:TSC), Value Line, Inc. (NASDAQ:VALU), and Crestwood Equity Partners LP (NYSE:CEQP). This group of stocks' market caps are closest to HRTG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HIFS,3,4293,0 TSC,16,23757,4 VALU,2,2959,0 CEQP,4,1382,-2 Average,6.25,8098,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $20 million in HRTG's case. Tristate Capital Holdings Inc (NASDAQ:TSC) is the most popular stock in this table. On the other hand Value Line, Inc. (NASDAQ:VALU) is the least popular one with only 2 bullish hedge fund positions. Heritage Insurance Holdings Inc (NYSE:HRTG) 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. 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately HRTG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on HRTG were disappointed as the stock returned 18.8% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.