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Hedge Funds Dipping Their Toes Back Into Herbalife Nutrition Ltd. (HLF)

Asma UL Husna

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 second 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 5 years and analyze what the smart money thinks of Herbalife Nutrition Ltd. (NYSE:HLF) based on that data and determine whether they were really smart about the stock.

Herbalife Nutrition Ltd. (NYSE:HLF) was in 36 hedge funds' portfolios at the end of June. The all time high for this statistics is 44. HLF has seen an increase in support from the world's most elite money managers of late. There were 31 hedge funds in our database with HLF holdings at the end of March. Our calculations also showed that HLF isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

Today there are dozens of formulas stock traders have at their disposal to size up their holdings. A duo of the most innovative formulas are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outperform the market by a superb margin (see the details here).

Most Popular Stocks Among Hedge Funds
Most Popular Stocks Among Hedge Funds

Carl Icahn of Icahn Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind let's take a look at the recent hedge fund action regarding Herbalife Nutrition Ltd. (NYSE:HLF).

How are hedge funds trading Herbalife Nutrition Ltd. (NYSE:HLF)?

At second quarter's end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in HLF a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Herbalife Nutrition Ltd. (NYSE:HLF) was held by Icahn Capital LP, which reported holding $1584.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $494.7 million position. Other investors bullish on the company included Deccan Value Advisors, Route One Investment Company, and Bronte Capital. In terms of the portfolio weights assigned to each position Deccan Value Advisors allocated the biggest weight to Herbalife Nutrition Ltd. (NYSE:HLF), around 16.96% of its 13F portfolio. Bronte Capital is also relatively very bullish on the stock, designating 16.1 percent of its 13F equity portfolio to HLF.

Now, specific money managers were leading the bulls' herd. JS Capital, managed by Jonathan Soros, created the most outsized position in Herbalife Nutrition Ltd. (NYSE:HLF). JS Capital had $23.5 million invested in the company at the end of the quarter. Derek C. Schrier's Indaba Capital Management also initiated a $19.5 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny's Balyasny Asset Management, Allan Teh's Kamunting Street Capital, and Lee Ainslie's Maverick Capital.

Let's go over hedge fund activity in other stocks similar to Herbalife Nutrition Ltd. (NYSE:HLF). We will take a look at LPL Financial Holdings Inc (NASDAQ:LPLA), BanColombia S.A. (NYSE:CIB), Assurant, Inc. (NYSE:AIZ), Encompass Health Corporation (NYSE:EHC), ADT Inc. (NYSE:ADT), Adaptive Biotechnologies Corporation (NASDAQ:ADPT), and Zai Lab Limited (NASDAQ:ZLAB). This group of stocks' market valuations are closest to HLF's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LPLA,43,892669,10 CIB,9,69617,-2 AIZ,31,822763,-2 EHC,33,498955,0 ADT,20,207319,0 ADPT,28,2690388,10 ZLAB,27,416774,5 Average,27.3,799784,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $800 million. That figure was $3052 million in HLF's case. LPL Financial Holdings Inc (NASDAQ:LPLA) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 9 bullish hedge fund positions. Herbalife Nutrition Ltd. (NYSE:HLF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HLF is 74.3. 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 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately HLF wasn't nearly as popular as these 10 stocks and hedge funds that were betting on HLF were disappointed as the stock returned 9.3% 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.

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Disclosure: None. This article was originally published at Insider Monkey.

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