We can judge whether HB Fuller Co (NYSE:FUL) 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.
HB Fuller Co (NYSE:FUL) has experienced an increase in hedge fund sentiment recently. FUL was in 14 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 8 hedge funds in our database with FUL positions at the end of the previous quarter. Our calculations also showed that FUL isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a glance at the recent hedge fund action regarding HB Fuller Co (NYSE:FUL).
What have hedge funds been doing with HB Fuller Co (NYSE:FUL)?
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 75% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in FUL a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Claus Moller's P2 Capital Partners has the biggest position in HB Fuller Co (NYSE:FUL), worth close to $40 million, accounting for 4% of its total 13F portfolio. The second most bullish fund manager is Mario Gabelli of GAMCO Investors, with a $25.2 million position; 0.2% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish encompass Phill Gross and Robert Atchinson's Adage Capital Management, Israel Englander's Millennium Management and Ed Bosek's BeaconLight Capital.
Consequently, key hedge funds were leading the bulls' herd. Millennium Management, managed by Israel Englander, assembled the biggest position in HB Fuller Co (NYSE:FUL). Millennium Management had $10.3 million invested in the company at the end of the quarter. Jonathan Barrett and Paul Segal's Luminus Management also initiated a $5.2 million position during the quarter. The other funds with brand new FUL positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Joel Greenblatt's Gotham Asset Management, and Ken Griffin's Citadel Investment Group.
Let's check out hedge fund activity in other stocks similar to HB Fuller Co (NYSE:FUL). These stocks are Inovalon Holdings Inc (NASDAQ:INOV), Cosan Limited (NYSE:CZZ), Q2 Holdings Inc (NYSE:QTWO), and Global Blood Therapeutics Inc (NASDAQ:GBT). This group of stocks' market caps resemble FUL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INOV,13,26035,0 CZZ,18,109958,5 QTWO,12,49605,-1 GBT,25,545078,0 Average,17,182669,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $118 million in FUL's case. Global Blood Therapeutics Inc (NASDAQ:GBT) is the most popular stock in this table. On the other hand Q2 Holdings Inc (NYSE:QTWO) is the least popular one with only 12 bullish hedge fund positions. HB Fuller Co (NYSE:FUL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on FUL, though not to the same extent, as the stock returned 17.5% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.