Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Huntington Bancshares Incorporated (NASDAQ:HBAN) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds' portfolios at the end of September. At the end of this article we will also compare HBAN to other stocks including National Oilwell Varco, Inc. (NYSE:NOV), ResMed Inc. (NYSE:RMD), and Telefonica Brasil SA (NYSE:VIV) to get a better sense of its popularity.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's review the latest hedge fund action encompassing Huntington Bancshares Incorporated (NASDAQ:HBAN).
Hedge fund activity in Huntington Bancshares Incorporated (NASDAQ:HBAN)
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in HBAN heading into this year. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of Huntington Bancshares Incorporated (NASDAQ:HBAN), with a stake worth $67.7 million reported as of the end of September. Trailing Adage Capital Management was Stelliam Investment Management, which amassed a stake valued at $35.8 million. EJF Capital, White Elm Capital, and Elizabeth Park Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Huntington Bancshares Incorporated (NASDAQ:HBAN) has witnessed a decline in interest from the smart money, logic holds that there is a sect of hedgies that elected to cut their full holdings heading into Q3. It's worth mentioning that Jim Simons's Renaissance Technologies sold off the largest investment of all the hedgies followed by Insider Monkey, comprising an estimated $13.7 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also sold off its stock, about $9.9 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Huntington Bancshares Incorporated (NASDAQ:HBAN) but similarly valued. These stocks are National Oilwell Varco, Inc. (NYSE:NOV), ResMed Inc. (NYSE:RMD), Telefonica Brasil SA (NYSE:VIV), and Essex Property Trust Inc (NYSE:ESS). All of these stocks' market caps match HBAN's market cap.
Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOV,22,639635,8 RMD,24,488694,5 VIV,13,86839,4 ESS,16,406511,-7 Average,18.75,405420,2.5 [/table]
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As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $405 million. That figure was $261 million in HBAN's case. ResMed Inc. (NYSE:RMD) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Huntington Bancshares Incorporated (NASDAQ:HBAN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.