We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Hill-Rom Holdings, Inc. (NYSE:HRC) based on that data.
Is Hill-Rom Holdings, Inc. (NYSE:HRC) a sound stock to buy now? Money managers are getting less bullish. The number of bullish hedge fund bets decreased by 2 in recent months. Our calculations also showed that HRC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). HRC was in 27 hedge funds' portfolios at the end of December. There were 29 hedge funds in our database with HRC holdings at the end of the previous quarter.
In the 21st century investor’s toolkit there are a lot of tools market participants can use to size up their holdings. A pair of the best tools are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can outclass the broader indices by a solid margin (see the details here).
[caption id="attachment_30600" align="aligncenter" width="400"] Bruce Kovner of Caxton Associates LP[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind let's analyze the recent hedge fund action surrounding Hill-Rom Holdings, Inc. (NYSE:HRC).
What have hedge funds been doing with Hill-Rom Holdings, Inc. (NYSE:HRC)?
At the end of the fourth quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 29 hedge funds with a bullish position in HRC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in Hill-Rom Holdings, Inc. (NYSE:HRC), which was worth $319.2 million at the end of the third quarter. On the second spot was Millennium Management which amassed $147 million worth of shares. Fisher Asset Management, Polar Capital, and Renaissance Technologies 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 Endurant Capital Management allocated the biggest weight to Hill-Rom Holdings, Inc. (NYSE:HRC), around 2.35% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, setting aside 2.08 percent of its 13F equity portfolio to HRC.
Since Hill-Rom Holdings, Inc. (NYSE:HRC) has witnessed falling interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers who were dropping their full holdings heading into Q4. At the top of the heap, David Harding's Winton Capital Management cut the biggest investment of the 750 funds monitored by Insider Monkey, worth about $9.8 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund said goodbye to about $5.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Hill-Rom Holdings, Inc. (NYSE:HRC) but similarly valued. These stocks are Levi Strauss & Co. (NYSE:LEVI), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), The Stars Group Inc. (NASDAQ:TSG), and Gardner Denver Holdings, Inc. (NYSE:GDI). This group of stocks' market values match HRC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LEVI,11,34219,1 SPR,48,1874707,9 TSG,45,1366436,11 GDI,22,232648,3 Average,31.5,877003,6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $877 million. That figure was $794 million in HRC's case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand Levi Strauss & Co. (NYSE:LEVI) is the least popular one with only 11 bullish hedge fund positions. Hill-Rom Holdings, Inc. (NYSE:HRC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately HRC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HRC investors were disappointed as the stock returned -28.1% during the same time period 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 most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.