In this article we will take a look at whether hedge funds think Horizon Global Corp (NYSE:HZN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Horizon Global Corp (NYSE:HZN) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of the first quarter of 2020. At the end of this article we will also compare HZN to other stocks including Babcock & Wilcox Enterprises Inc (NYSE:BW), Penn Virginia Corporation (NASDAQ:PVAC), and Vista Gold Corp. (NYSE:VGZ) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_365194" align="aligncenter" width="399"] David E. Shaw of D.E. Shaw[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's check out the new hedge fund action surrounding Horizon Global Corp (NYSE:HZN).
Hedge fund activity in Horizon Global Corp (NYSE:HZN)
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HZN over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Horizon Global Corp (NYSE:HZN), with a stake worth $3.5 million reported as of the end of September. Trailing Royce & Associates was D E Shaw, which amassed a stake valued at $0.9 million. Renaissance Technologies was 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 Royce & Associates allocated the biggest weight to Horizon Global Corp (NYSE:HZN), around 0.05% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, dishing out 0.0014 percent of its 13F equity portfolio to HZN.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Horizon Global Corp (NYSE:HZN) but similarly valued. We will take a look at Babcock & Wilcox Enterprises Inc (NYSE:BW), Penn Virginia Corporation (NASDAQ:PVAC), Vista Gold Corp. (NYSE:VGZ), and Richardson Electronics, Ltd. (NASDAQ:RELL). All of these stocks' market caps resemble HZN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BW,8,5693,0 PVAC,16,20598,1 VGZ,3,8733,0 RELL,4,9036,0 Average,7.75,11015,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $5 million in HZN's case. Penn Virginia Corporation (NASDAQ:PVAC) is the most popular stock in this table. On the other hand Vista Gold Corp. (NYSE:VGZ) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Horizon Global Corp (NYSE:HZN) is even less popular than VGZ. Hedge funds dodged a bullet by taking a bearish stance towards HZN. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately HZN wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); HZN investors were disappointed as the stock returned -19.3% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.