It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like HeadHunter Group PLC (NASDAQ:HHR).
HeadHunter Group PLC (NASDAQ:HHR) investors should pay attention to a decrease in support from the world's most elite money managers lately. HHR was in 8 hedge funds' portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with HHR positions at the end of the previous quarter. Our calculations also showed that HHR 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' 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_27480" align="aligncenter" width="450"] Israel Englander of Millennium Management[/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. Let's take a gander at the new hedge fund action encompassing HeadHunter Group PLC (NASDAQ:HHR).
What have hedge funds been doing with HeadHunter Group PLC (NASDAQ:HHR)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in HHR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Scopia Capital was the largest shareholder of HeadHunter Group PLC (NASDAQ:HHR), with a stake worth $40.9 million reported as of the end of September. Trailing Scopia Capital was Cadian Capital, which amassed a stake valued at $17.6 million. Cat Rock Capital, Millennium Management, and Sloane Robinson Investment Management 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 Scopia Capital allocated the biggest weight to HeadHunter Group PLC (NASDAQ:HHR), around 2.39% of its 13F portfolio. Sloane Robinson Investment Management is also relatively very bullish on the stock, designating 1.36 percent of its 13F equity portfolio to HHR.
Seeing as HeadHunter Group PLC (NASDAQ:HHR) has witnessed falling interest from hedge fund managers, we can see that there is a sect of funds that elected to cut their positions entirely last quarter. Interestingly, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital dumped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, valued at about $1.6 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund said goodbye to about $1.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 4 funds last quarter.
Let's check out hedge fund activity in other stocks similar to HeadHunter Group PLC (NASDAQ:HHR). These stocks are iHeartMedia, Inc. (NASDAQ:IHRT), 3D Systems Corporation (NYSE:DDD), Astronics Corporation (NASDAQ:ATRO), and Range Resources Corporation (NYSE:RRC). All of these stocks' market caps are similar to HHR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IHRT,26,178664,26 DDD,12,39120,1 ATRO,13,103363,-5 RRC,26,263175,-5 Average,19.25,146081,4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $74 million in HHR's case. iHeartMedia, Inc. (NASDAQ:IHRT) is the most popular stock in this table. On the other hand 3D Systems Corporation (NYSE:DDD) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks HeadHunter Group PLC (NASDAQ:HHR) is even less popular than DDD. Hedge funds dodged a bullet by taking a bearish stance towards HHR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HHR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HHR investors were disappointed as the stock returned 5.9% 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.