Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards At Home Group Inc. (NYSE:HOME).
Is At Home Group Inc. (NYSE:HOME) a buy right now? Hedge funds are turning bullish. The number of bullish hedge fund bets increased by 8 lately. Our calculations also showed that home isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to review the fresh hedge fund action surrounding At Home Group Inc. (NYSE:HOME).
Hedge fund activity in At Home Group Inc. (NYSE:HOME)
At Q1's end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HOME over the last 15 quarters. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in At Home Group Inc. (NYSE:HOME), which was worth $28.2 million at the end of the first quarter. On the second spot was Daruma Asset Management which amassed $27.1 million worth of shares. Moreover, Hoplite Capital Management, Private Capital Management, and Clearfield Capital were also bullish on At Home Group Inc. (NYSE:HOME), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers were leading the bulls' herd. Clearfield Capital, managed by Philip Hilal, established the largest position in At Home Group Inc. (NYSE:HOME). Clearfield Capital had $14.5 million invested in the company at the end of the quarter. Bain Capital's Brookside Capital also made a $9.5 million investment in the stock during the quarter. The other funds with brand new HOME positions are Matthew Iorio's White Elm Capital, Robert Pohly's Samlyn Capital, and Louis Bacon's Moore Global Investments.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as At Home Group Inc. (NYSE:HOME) but similarly valued. These stocks are Bitauto Holdings Limited (NYSE:BITA), PPDAI Group Inc. (NYSE:PPDF), Denny's Corporation (NASDAQ:DENN), and Orion Engineered Carbons SA (NYSE:OEC). This group of stocks' market valuations match HOME's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BITA,7,11115,0 PPDF,12,8046,6 DENN,19,171859,0 OEC,23,249517,0 Average,15.25,110134,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $248 million in HOME's case. Orion Engineered Carbons SA (NYSE:OEC) is the most popular stock in this table. On the other hand Bitauto Holdings Limited (NYSE:BITA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks At Home Group Inc. (NYSE:HOME) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on HOME as the stock returned 8.7% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.