The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Federated Hermes, Inc. (NYSE:FHI) and determine whether the smart money was really smart about this stock.
Federated Hermes, Inc. (NYSE:FHI) has experienced an increase in support from the world's most elite money managers lately. Federated Hermes, Inc. (NYSE:FHI) was in 30 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 28 hedge funds in our database with FHI holdings at the end of March. Our calculations also showed that FHI 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
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. With all of this in mind we're going to take a look at the recent hedge fund action encompassing Federated Hermes, Inc. (NYSE:FHI).
Hedge fund activity in Federated Hermes, Inc. (NYSE:FHI)
At the end of June, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in FHI over the last 20 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Federated Hermes, Inc. (NYSE:FHI), which was worth $34.8 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $33.5 million worth of shares. Arrowstreet Capital, Marshall Wace LLP, and Millennium 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 Hourglass Capital allocated the biggest weight to Federated Hermes, Inc. (NYSE:FHI), around 1.77% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 0.63 percent of its 13F equity portfolio to FHI.
Now, key money managers have jumped into Federated Hermes, Inc. (NYSE:FHI) headfirst. ExodusPoint Capital, managed by Michael Gelband, established the most valuable position in Federated Hermes, Inc. (NYSE:FHI). ExodusPoint Capital had $1.2 million invested in the company at the end of the quarter. Murray Stahl's Horizon Asset Management also initiated a $1 million position during the quarter. The following funds were also among the new FHI investors: Donald Sussman's Paloma Partners, Minhua Zhang's Weld Capital Management, and Bruce Kovner's Caxton Associates LP.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Federated Hermes, Inc. (NYSE:FHI) but similarly valued. These stocks are Evercore Inc. (NYSE:EVR), Arco Platform Limited (NASDAQ:ARCE), ViaSat, Inc. (NASDAQ:VSAT), Kennametal Inc. (NYSE:KMT), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), Fiverr International Ltd. (NYSE:FVRR), and Sunrun Inc (NASDAQ:RUN). All of these stocks' market caps match FHI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EVR,25,176532,-4 ARCE,25,183602,9 VSAT,23,1006955,2 KMT,10,197490,-7 SAIL,21,491091,0 FVRR,21,184813,8 RUN,21,682771,-3 Average,20.9,417608,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $418 million. That figure was $168 million in FHI's case. Evercore Inc. (NYSE:EVR) is the most popular stock in this table. On the other hand Kennametal Inc. (NYSE:KMT) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Federated Hermes, Inc. (NYSE:FHI) is more popular among hedge funds. Our overall hedge fund sentiment score for FHI is 87. 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. 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Unfortunately FHI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on FHI were disappointed as the stock returned -2.3% since the end of 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.
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Disclosure: None. This article was originally published at Insider Monkey.