We can judge whether Harley-Davidson, Inc. (NYSE:HOG) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Harley-Davidson, Inc. (NYSE:HOG) a buy here? The best stock pickers are becoming less hopeful. The number of bullish hedge fund bets shrunk by 3 lately. Our calculations also showed that hog isn't among the 30 most popular stocks among hedge funds. HOG was in 16 hedge funds' portfolios at the end of March. There were 19 hedge funds in our database with HOG positions at the end of the previous quarter.
To most shareholders, hedge funds are perceived as unimportant, old investment vehicles of years past. While there are over 8000 funds in operation at present, We choose to focus on the crème de la crème of this club, about 750 funds. These money managers control bulk of the smart money's total capital, and by keeping an eye on their top picks, Insider Monkey has unsheathed a few investment strategies that have historically exceeded the S&P 500 index. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
Let's review the key hedge fund action surrounding Harley-Davidson, Inc. (NYSE:HOG).
How have hedgies been trading Harley-Davidson, Inc. (NYSE:HOG)?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in HOG a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Harley-Davidson, Inc. (NYSE:HOG) was held by Impala Asset Management, which reported holding $22.7 million worth of stock at the end of March. It was followed by Point72 Asset Management with a $10.7 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Adage Capital Management.
Since Harley-Davidson, Inc. (NYSE:HOG) has experienced bearish sentiment from hedge fund managers, it's safe to say that there is a sect of fund managers that decided to sell off their full holdings last quarter. It's worth mentioning that Joel Greenblatt's Gotham Asset Management dropped the largest stake of the 700 funds watched by Insider Monkey, totaling about $12.4 million in stock. Ken Griffin's fund, Citadel Investment Group, also dumped its stock, about $7.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 3 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Harley-Davidson, Inc. (NYSE:HOG). We will take a look at CyrusOne Inc (NASDAQ:CONE), RealPage, Inc. (NASDAQ:RP), Jefferies Financial Group Inc. (NYSE:JEF), and Companhia Siderurgica Nacional (NYSE:SID). This group of stocks' market caps are closest to HOG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CONE,17,193050,3 RP,26,435872,5 JEF,35,669334,-1 SID,8,69878,1 Average,21.5,342034,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $342 million. That figure was $55 million in HOG's case. Jefferies Financial Group Inc. (NYSE:JEF) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 8 bullish hedge fund positions. Harley-Davidson, Inc. (NYSE:HOG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately HOG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HOG investors were disappointed as the stock returned -1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.