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World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Hooker Furniture Corporation (NASDAQ:HOFT) undervalued? The smart money is in a bearish mood. The number of long hedge fund positions retreated by 5 recently. Our calculations also showed that HOFT isn't among the 30 most popular stocks among hedge funds (see the video below). HOFT was in 6 hedge funds' portfolios at the end of June. There were 11 hedge funds in our database with HOFT holdings at the end of the previous quarter.
Video: Click the image to 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 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's take a look at the fresh hedge fund action encompassing Hooker Furniture Corporation (NASDAQ:HOFT).
What does smart money think about Hooker Furniture Corporation (NASDAQ:HOFT)?
Heading into the third quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -45% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HOFT over the last 16 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Hooker Furniture Corporation (NASDAQ:HOFT), with a stake worth $30.1 million reported as of the end of March. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $4.9 million. Arrowstreet Capital, AQR Capital Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Hooker Furniture Corporation (NASDAQ:HOFT) has witnessed a decline in interest from hedge fund managers, it's easy to see that there is a sect of money managers that slashed their full holdings heading into Q3. It's worth mentioning that Israel Englander's Millennium Management dumped the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $2.3 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also cut its stock, about $1.2 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 5 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Hooker Furniture Corporation (NASDAQ:HOFT) but similarly valued. We will take a look at Aratana Therapeutics Inc (NASDAQ:PETX), Chiasma Inc (NASDAQ:CHMA), Western New England Bancorp, Inc. (NASDAQ:WNEB), and Roan Resources, Inc. (NYSE:ROAN). This group of stocks' market values are similar to HOFT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PETX,16,94993,5 CHMA,7,51704,0 WNEB,3,22329,-1 ROAN,14,86158,-4 Average,10,63796,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $40 million in HOFT's case. Aratana Therapeutics Inc (NASDAQ:PETX) is the most popular stock in this table. On the other hand Western New England Bancorp, Inc. (NASDAQ:WNEB) is the least popular one with only 3 bullish hedge fund positions. Hooker Furniture Corporation (NASDAQ:HOFT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on HOFT, though not to the same extent, as the stock returned 4.7% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
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