At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Hamilton Lane Incorporated (NASDAQ:HLNE).
Is Hamilton Lane Incorporated (NASDAQ:HLNE) a buy here? The best stock pickers are selling. The number of long hedge fund bets were cut by 1 in recent months. Our calculations also showed that HLNE 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). HLNE was in 9 hedge funds' portfolios at the end of March. There were 10 hedge funds in our database with HLNE holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are several signals shareholders can use to grade stocks. A duo of the less known signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the top investment managers can outperform their index-focused peers by a significant margin (see the details here).
[caption id="attachment_221556" align="aligncenter" width="394"] Richard Driehaus of Driehaus Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the new hedge fund action encompassing Hamilton Lane Incorporated (NASDAQ:HLNE).
What does smart money think about Hamilton Lane Incorporated (NASDAQ:HLNE)?
Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HLNE over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in Hamilton Lane Incorporated (NASDAQ:HLNE) was held by Renaissance Technologies, which reported holding $45.5 million worth of stock at the end of September. It was followed by Columbus Circle Investors with a $12.3 million position. Other investors bullish on the company included Millennium Management, Driehaus Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Columbus Circle Investors allocated the biggest weight to Hamilton Lane Incorporated (NASDAQ:HLNE), around 0.68% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, earmarking 0.09 percent of its 13F equity portfolio to HLNE.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Balyasny Asset Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified HLNE as a viable investment and initiated a position in the stock.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Hamilton Lane Incorporated (NASDAQ:HLNE) but similarly valued. We will take a look at Companhia Paranaense de Energia - COPEL (NYSE:ELP), Envestnet Inc (NYSE:ENV), Vertiv Holdings Co (NYSE:VRT), and Continental Resources, Inc. (NYSE:CLR). This group of stocks' market valuations match HLNE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ELP,7,44533,0 ENV,17,74887,-1 VRT,39,540556,4 CLR,26,66933,-12 Average,22.25,181727,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $68 million in HLNE's case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia - COPEL (NYSE:ELP) is the least popular one with only 7 bullish hedge fund positions. Hamilton Lane Incorporated (NASDAQ:HLNE) 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 HLNE wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HLNE investors were disappointed as the stock returned 18.7% 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.