Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of HCI Group, Inc. (NYSE:HCI) based on that data.
HCI Group, Inc. (NYSE:HCI) was in 12 hedge funds' portfolios at the end of the third quarter of 2019. HCI investors should pay attention to an increase in activity from the world's largest hedge funds of late. There were 11 hedge funds in our database with HCI positions at the end of the previous quarter. Our calculations also showed that HCI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's take a look at the fresh hedge fund action surrounding HCI Group, Inc. (NYSE:HCI).
What does smart money think about HCI Group, Inc. (NYSE:HCI)?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HCI over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in HCI Group, Inc. (NYSE:HCI). Royce & Associates has a $8.1 million position in the stock, comprising 0.1% of its 13F portfolio. On Royce & Associates's heels is Millennium Management, managed by Israel Englander, which holds a $6.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism consist of Renaissance Technologies, Noam Gottesman's GLG Partners and Michael Gelband's ExodusPoint Capital. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to HCI Group, Inc. (NYSE:HCI), around 0.08% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to HCI.
As one would reasonably expect, key money managers have jumped into HCI Group, Inc. (NYSE:HCI) headfirst. ExodusPoint Capital, managed by Michael Gelband, established the biggest position in HCI Group, Inc. (NYSE:HCI). ExodusPoint Capital had $0.8 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace also initiated a $0.6 million position during the quarter. The following funds were also among the new HCI investors: Cliff Asness's AQR Capital Management, David E. Shaw's D E Shaw, and Ken Griffin's Citadel Investment Group.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as HCI Group, Inc. (NYSE:HCI) but similarly valued. These stocks are Artesian Resources Corporation (NASDAQ:ARTNA), Vera Bradley, Inc. (NASDAQ:VRA), Consolidated Communications Holdings Inc (NASDAQ:CNSL), and Atreca, Inc. (NASDAQ:BCEL). All of these stocks' market caps resemble HCI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARTNA,3,17330,0 VRA,15,56748,-1 CNSL,20,19802,6 BCEL,6,88230,-3 Average,11,45528,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $26 million in HCI's case. Consolidated Communications Holdings Inc (NASDAQ:CNSL) is the most popular stock in this table. On the other hand Artesian Resources Corporation (NASDAQ:ARTNA) is the least popular one with only 3 bullish hedge fund positions. HCI Group, Inc. (NYSE:HCI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on HCI as the stock returned 11.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.