Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Huntington Bancshares Incorporated (NASDAQ:HBAN)? The smart money sentiment can provide an answer to this question.
Huntington Bancshares Incorporated (NASDAQ:HBAN) was in 20 hedge funds' portfolios at the end of September. HBAN investors should pay attention to a decrease in enthusiasm from smart money lately. There were 23 hedge funds in our database with HBAN holdings at the end of the previous quarter. Our calculations also showed that HBAN 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_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the key hedge fund action encompassing Huntington Bancshares Incorporated (NASDAQ:HBAN).
Hedge fund activity in Huntington Bancshares Incorporated (NASDAQ:HBAN)
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 26 hedge funds with a bullish position in HBAN a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Balyasny Asset Management held the most valuable stake in Huntington Bancshares Incorporated (NASDAQ:HBAN), which was worth $55.9 million at the end of the third quarter. On the second spot was White Elm Capital which amassed $12.7 million worth of shares. Elizabeth Park Capital Management, GAMCO Investors, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position White Elm Capital allocated the biggest weight to Huntington Bancshares Incorporated (NASDAQ:HBAN), around 3.27% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, dishing out 2.78 percent of its 13F equity portfolio to HBAN.
Because Huntington Bancshares Incorporated (NASDAQ:HBAN) has experienced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of hedge funds that elected to cut their entire stakes by the end of the third quarter. It's worth mentioning that Matthew Lindenbaum's Basswood Capital said goodbye to the largest stake of all the hedgies followed by Insider Monkey, totaling about $3.3 million in stock. Ben Levine, Andrew Manuel and Stefan Renold's fund, LMR Partners, also sold off its stock, about $0.7 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Huntington Bancshares Incorporated (NASDAQ:HBAN) but similarly valued. We will take a look at Ulta Beauty, Inc. (NASDAQ:ULTA), The Cooper Companies, Inc. (NYSE:COO), Diamondback Energy Inc (NASDAQ:FANG), and NortonLifeLock Inc. (NASDAQ:SYMC). This group of stocks' market caps are closest to HBAN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ULTA,39,900250,-5 COO,27,741670,-1 FANG,40,1201319,-7 SYMC,38,1527336,3 Average,36,1092644,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1093 million. That figure was $96 million in HBAN's case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand The Cooper Companies, Inc. (NYSE:COO) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Huntington Bancshares Incorporated (NASDAQ:HBAN) is even less popular than COO. Hedge funds dodged a bullet by taking a bearish stance towards HBAN. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HBAN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HBAN investors were disappointed as the stock returned 4.3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.