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.
Is The Hain Celestial Group, Inc. (NASDAQ:HAIN) undervalued? The smart money is becoming hopeful. The number of long hedge fund positions advanced by 1 in recent months. Our calculations also showed that HAIN isn't among the 30 most popular stocks among hedge funds. HAIN was in 23 hedge funds' portfolios at the end of September. There were 22 hedge funds in our database with HAIN positions at the end of the previous quarter.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the fresh hedge fund action encompassing The Hain Celestial Group, Inc. (NASDAQ:HAIN).
Hedge fund activity in The Hain Celestial Group, Inc. (NASDAQ:HAIN)
Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the second quarter of 2018. By comparison, 31 hedge funds held shares or bullish call options in HAIN heading into this year. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The Hain Celestial Group, Inc. (NASDAQ:HAIN) was held by Engaged Capital, which reported holding $319 million worth of stock at the end of September. It was followed by Armistice Capital with a $54.2 million position. Other investors bullish on the company included JANA Partners, Citadel Investment Group, and Armistice Capital.
As aggregate interest increased, some big names were breaking ground themselves. JANA Partners, managed by Barry Rosenstein, initiated the most valuable position in The Hain Celestial Group, Inc. (NASDAQ:HAIN). JANA Partners had $36.1 million invested in the company at the end of the quarter. Steven Boyd's Armistice Capital also made a $27.1 million investment in the stock during the quarter. The other funds with brand new HAIN positions are Dmitry Balyasny's Balyasny Asset Management, Larry Foley and Paul Farrell's Bronson Point Partners, and Joel Greenblatt's Gotham Asset Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as The Hain Celestial Group, Inc. (NASDAQ:HAIN) but similarly valued. These stocks are Brandywine Realty Trust (NYSE:BDN), Colony Credit Real Estate, Inc. (NYSE:CLNC), Golar LNG Limited (NASDAQ:GLNG), and Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. (NASDAQ:OMAB). All of these stocks' market caps match HAIN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BDN,15,122144,2 CLNC,4,4238,2 GLNG,34,651684,2 OMAB,5,38025,1 Average,14.5,204023,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $537 million in HAIN's case. Golar LNG Limited (NASDAQ:GLNG) is the most popular stock in this table. On the other hand Colony Credit Real Estate, Inc. (NYSE:CLNC) is the least popular one with only 4 bullish hedge fund positions. The Hain Celestial Group, Inc. (NASDAQ:HAIN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard GLNG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.