Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 20 stock picks easily bested the broader market, at 37.4% compared to 27.5%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Haverty Furniture Companies, Inc. (NYSE:HVT) shareholders have witnessed an increase in activity from the world's largest hedge funds in recent months. HVT was in 12 hedge funds' portfolios at the end of September. There were 9 hedge funds in our database with HVT holdings at the end of the previous quarter. Our calculations also showed that HVT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the fresh hedge fund action regarding Haverty Furniture Companies, Inc. (NYSE:HVT).
What does smart money think about Haverty Furniture Companies, Inc. (NYSE:HVT)?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the second quarter of 2019. On the other hand, there were a total of 10 hedge funds with a bullish position in HVT a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Haverty Furniture Companies, Inc. (NYSE:HVT), which was worth $28.3 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $19.2 million worth of shares. Arrowstreet Capital, Millennium Management, and Citadel Investment Group 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 Haverty Furniture Companies, Inc. (NYSE:HVT), around 0.18% of its 13F portfolio. Caxton Associates is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to HVT.
As industrywide interest jumped, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the biggest position in Haverty Furniture Companies, Inc. (NYSE:HVT). Citadel Investment Group had $1.7 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.3 million position during the quarter. The only other fund with a brand new HVT position is Paul Marshall and Ian Wace's Marshall Wace.
Let's now review hedge fund activity in other stocks similar to Haverty Furniture Companies, Inc. (NYSE:HVT). We will take a look at Sohu.com Inc (NASDAQ:SOHU), 111, Inc. (NASDAQ:YI), Magenta Therapeutics, Inc. (NASDAQ:MGTA), and Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI). This group of stocks' market values resemble HVT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SOHU,13,77264,4 YI,2,3771,-1 MGTA,9,49838,1 ACBI,14,64813,2 Average,9.5,48922,1.5 [/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 $49 million. That figure was $64 million in HVT's case. Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI) is the most popular stock in this table. On the other hand 111, Inc. (NASDAQ:YI) is the least popular one with only 2 bullish hedge fund positions. Haverty Furniture Companies, Inc. (NYSE:HVT) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HVT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HVT were disappointed as the stock returned 0.2% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.