Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the fourth quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Health Insurance Innovations Inc (NASDAQ:HIIQ) changed recently.
Is Health Insurance Innovations Inc (NASDAQ:HIIQ) a good stock to buy now? The smart money is in an optimistic mood. The number of bullish hedge fund positions increased by 1 in recent months. Our calculations also showed that HIIQ isn't among the 30 most popular stocks among hedge funds.
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' 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. 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 latest hedge fund action regarding Health Insurance Innovations Inc (NASDAQ:HIIQ).
How have hedgies been trading Health Insurance Innovations Inc (NASDAQ:HIIQ)?
Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HIIQ over the last 14 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Harvest Capital Strategies was the largest shareholder of Health Insurance Innovations Inc (NASDAQ:HIIQ), with a stake worth $25.4 million reported as of the end of December. Trailing Harvest Capital Strategies was P2 Capital Partners, which amassed a stake valued at $22.2 million. Cannell Capital, Renaissance Technologies, and Cardinal Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key hedge funds were leading the bulls' herd. Millennium Management, managed by Israel Englander, assembled the most outsized position in Health Insurance Innovations Inc (NASDAQ:HIIQ). Millennium Management had $11.2 million invested in the company at the end of the quarter. Joseph A. Jolson's Harvest Capital Strategies also initiated a $8.1 million position during the quarter. The other funds with new positions in the stock are Adam Usdan's Trellus Management Company, Dmitry Balyasny's Balyasny Asset Management, and Paul Tudor Jones's Tudor Investment Corp.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Health Insurance Innovations Inc (NASDAQ:HIIQ) but similarly valued. We will take a look at Och-Ziff Capital Management Group LLC (NYSE:OZM), CONSOL Coal Resources LP (NYSE:CCR), Forum Energy Technologies Inc (NYSE:FET), and Kezar Life Sciences, Inc. (NASDAQ:KZR). This group of stocks' market valuations are closest to HIIQ's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OZM,9,82213,0 CCR,5,97486,1 FET,11,52956,2 KZR,4,67447,-3 Average,7.25,75026,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $156 million in HIIQ's case. Forum Energy Technologies Inc (NYSE:FET) is the most popular stock in this table. On the other hand Kezar Life Sciences, Inc. (NASDAQ:KZR) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Health Insurance Innovations Inc (NASDAQ:HIIQ) is more popular among hedge funds. 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. Unfortunately HIIQ wasn't nearly as popular as these 15 stock and hedge funds that were betting on HIIQ were disappointed as the stock returned -7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.