It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during October and average hedge fund losing about 3%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 4 percentage points during the first half of Q4, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Hillenbrand, Inc. (NYSE:HI) during the quarter below.
Hillenbrand, Inc. (NYSE:HI) was in 20 hedge funds' portfolios at the end of September. HI has experienced an increase in hedge fund interest lately. There were 18 hedge funds in our database with HI holdings at the end of the previous quarter. Our calculations also showed that hi isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a gander at the recent hedge fund action regarding Hillenbrand, Inc. (NYSE:HI).
Hedge fund activity in Hillenbrand, Inc. (NYSE:HI)
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the second quarter of 2018. On the other hand, there were a total of 23 hedge funds with a bullish position in HI at the beginning of this year. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, GLG Partners, managed by Noam Gottesman, holds the most valuable position in Hillenbrand, Inc. (NYSE:HI). GLG Partners has a $26 million position in the stock, comprising 0.1% of its 13F portfolio. On GLG Partners's heels is Gotham Asset Management, managed by Joel Greenblatt, which holds a $9.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain D. E. Shaw's D E Shaw, John Overdeck and David Siegel's Two Sigma Advisors and Ken Griffin's Citadel Investment Group.
Consequently, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in Hillenbrand, Inc. (NYSE:HI). Arrowstreet Capital had $3.6 million invested in the company at the end of the quarter. Bruce Kovner's Caxton Associates LP also made a $0.4 million investment in the stock during the quarter. The only other fund with a brand new HI position is Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's now take a look at hedge fund activity in other stocks similar to Hillenbrand, Inc. (NYSE:HI). These stocks are Horizon Pharma Public Limited Company (NASDAQ:HZNP), Myriad Genetics, Inc. (NASDAQ:MYGN), Sodastream International Ltd (NASDAQ:SODA), and Verint Systems Inc. (NASDAQ:VRNT). All of these stocks' market caps are similar to HI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HZNP,21,875303,2 MYGN,21,379120,4 SODA,24,827744,8 VRNT,18,319776,0 Average,21,600486,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $600 million. That figure was $73 million in HI's case. Sodastream International Ltd (NASDAQ:SODA) is the most popular stock in this table. On the other hand Verint Systems Inc. (NASDAQ:VRNT) is the least popular one with only 18 bullish hedge fund positions. Hillenbrand, Inc. (NYSE:HI) 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. In this regard SODA might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.