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Helios Technologies, Inc. (HLIO): Hedge Funds Giving Up?

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds' top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Helios Technologies, Inc. (NASDAQ:HLIO).

Helios Technologies, Inc. (NASDAQ:HLIO) investors should pay attention to a decrease in support from the world's most elite money managers of late. HLIO was in 3 hedge funds' portfolios at the end of the third quarter of 2019. There were 4 hedge funds in our database with HLIO holdings at the end of the previous quarter. Our calculations also showed that HLIO isn't among the 30 most popular stocks among hedge funds.

Today there are a lot of formulas stock traders employ to analyze publicly traded companies. A couple of the most under-the-radar formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can trounce the broader indices by a healthy amount (see the details here).

[caption id="attachment_193003" align="aligncenter" width="450"] Chuck Royce of Royce & Associates[/caption]

Chuck Royce

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 check out the new hedge fund action regarding Helios Technologies, Inc. (NASDAQ:HLIO).

What does smart money think about Helios Technologies, Inc. (NASDAQ:HLIO)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in HLIO a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

No of Hedge Funds with HLIO Positions

Among these funds, Royce & Associates held the most valuable stake in Helios Technologies, Inc. (NASDAQ:HLIO), which was worth $70.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $3.9 million worth of shares. D E Shaw 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 Helios Technologies, Inc. (NASDAQ:HLIO), around 0.65% of its portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0033 percent of its 13F equity portfolio to HLIO.

Due to the fact that Helios Technologies, Inc. (NASDAQ:HLIO) has faced falling interest from hedge fund managers, logic holds that there exists a select few hedgies that decided to sell off their entire stakes in the third quarter. It's worth mentioning that Israel Englander's Millennium Management cut the biggest stake of the 750 funds watched by Insider Monkey, totaling about $1.2 million in call options. Matthew Hulsizer's fund, PEAK6 Capital Management, also said goodbye to its call options, about $0.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the third quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Helios Technologies, Inc. (NASDAQ:HLIO) but similarly valued. These stocks are Seacoast Banking Corporation of Florida (NASDAQ:SBCF), Veritex Holdings Inc (NASDAQ:VBTX), Independence Realty Trust Inc (NYSE:IRT), and Dine Brands Global, Inc. (NYSE:DIN). All of these stocks' market caps resemble HLIO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBCF,6,22958,0 VBTX,9,85782,1 IRT,12,95303,4 DIN,15,152183,0 Average,10.5,89057,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $75 million in HLIO's case. Dine Brands Global, Inc. (NYSE:DIN) is the most popular stock in this table. On the other hand Seacoast Banking Corporation of Florida (NASDAQ:SBCF) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Helios Technologies, Inc. (NASDAQ:HLIO) is even less popular than SBCF. Hedge funds clearly dropped the ball on HLIO as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on HLIO as the stock returned 9.1% during the fourth quarter (through 11/22) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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