Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of H&R Block, Inc. (NYSE:HRB) based on that data.
H&R Block, Inc. (NYSE:HRB) investors should pay attention to a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that HRB 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.
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_255014" align="aligncenter" width="391"] Clint Carlson of Carlson Capital[/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. 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. Now we're going to take a gander at the latest hedge fund action encompassing H&R Block, Inc. (NYSE:HRB).
Hedge fund activity in H&R Block, Inc. (NYSE:HRB)
At Q1's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -37% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in HRB over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in H&R Block, Inc. (NYSE:HRB) was held by D E Shaw, which reported holding $65.7 million worth of stock at the end of September. It was followed by AQR Capital Management with a $34 million position. Other investors bullish on the company included Polaris Capital Management, Citadel Investment Group, and GAMCO Investors. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to H&R Block, Inc. (NYSE:HRB), around 1.55% of its 13F portfolio. Cognios Capital is also relatively very bullish on the stock, dishing out 0.6 percent of its 13F equity portfolio to HRB.
Because H&R Block, Inc. (NYSE:HRB) has faced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedgies that elected to cut their entire stakes by the end of the first quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital cut the largest investment of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $7.8 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund sold off about $5.7 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 11 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as H&R Block, Inc. (NYSE:HRB) but similarly valued. We will take a look at Murphy USA Inc. (NYSE:MUSA), AMN Healthcare Services Inc (NYSE:AMN), The Hain Celestial Group, Inc. (NASDAQ:HAIN), and Appian Corporation (NASDAQ:APPN). All of these stocks' market caps match HRB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MUSA,24,198115,-4 AMN,22,78978,12 HAIN,20,704604,3 APPN,17,374002,0 Average,20.75,338925,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $178 million in HRB's case. Murphy USA Inc. (NYSE:MUSA) is the most popular stock in this table. On the other hand Appian Corporation (NASDAQ:APPN) is the least popular one with only 17 bullish hedge fund positions. H&R Block, Inc. (NYSE:HRB) 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 HRB wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HRB investors were disappointed as the stock returned 8.6% 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.