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"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on Huttig Building Products, Inc. (NASDAQ:HBP) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Hedge fund interest in Huttig Building Products, Inc. (NASDAQ:HBP) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Finjan Holdings, Inc. (NASDAQ:FNJN), ASLAN Pharmaceuticals Limited (NASDAQ:ASLN), and Immutep Limited (NASDAQ:IMMP) to gather more data points. Our calculations also showed that HBP isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_27480" align="aligncenter" width="450"]
Israel Englander of Millennium Management[/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 peek at the latest hedge fund action regarding Huttig Building Products, Inc. (NASDAQ:HBP).
Hedge fund activity in Huttig Building Products, Inc. (NASDAQ:HBP)
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HBP over the last 17 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Mill Road Capital Management was the largest shareholder of Huttig Building Products, Inc. (NASDAQ:HBP), with a stake worth $4 million reported as of the end of September. Trailing Mill Road Capital Management was Renaissance Technologies, which amassed a stake valued at $0.7 million. Millennium Management 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 Mill Road Capital Management allocated the biggest weight to Huttig Building Products, Inc. (NASDAQ:HBP), around 6.38% of its portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0006 percent of its 13F equity portfolio to HBP.
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 now review hedge fund activity in other stocks - not necessarily in the same industry as Huttig Building Products, Inc. (NASDAQ:HBP) but similarly valued. We will take a look at Finjan Holdings, Inc. (NASDAQ:FNJN), ASLAN Pharmaceuticals Limited (NASDAQ:ASLN), Immutep Limited (NASDAQ:IMMP), and Rocky Mountain Chocolate Factory, Inc. (NASDAQ:RMCF). This group of stocks' market values are closest to HBP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FNJN,4,4117,0 ASLN,1,719,-1 IMMP,1,75,-1 RMCF,2,7048,0 Average,2,2990,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $5 million in HBP's case. Finjan Holdings, Inc. (NASDAQ:FNJN) is the most popular stock in this table. On the other hand ASLAN Pharmaceuticals Limited (NASDAQ:ASLN) is the least popular one with only 1 bullish hedge fund positions. Huttig Building Products, Inc. (NASDAQ:HBP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately HBP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HBP were disappointed as the stock returned -11.9% during the fourth quarter (through 11/22) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
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