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Is Herbalife Nutrition Ltd. (HLF) A Good Stock To Buy?

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In this article we will analyze whether Herbalife Nutrition Ltd. (NYSE:HLF) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is HLF a good stock to buy? Herbalife Nutrition Ltd. (NYSE:HLF) shareholders have witnessed a decrease in hedge fund interest lately. Herbalife Nutrition Ltd. (NYSE:HLF) was in 40 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that HLF isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Carl Icahn's top 10 stock picks
Carl Icahn's top 10 stock picks

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's take a gander at the latest hedge fund action surrounding Herbalife Nutrition Ltd. (NYSE:HLF).

Do Hedge Funds Think HLF Is A Good Stock To Buy Now?

At Q1's end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HLF over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is HLF A Good Stock To Buy?
Is HLF A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Herbalife Nutrition Ltd. (NYSE:HLF), which was worth $400.8 million at the end of the fourth quarter. On the second spot was Icahn Capital LP which amassed $355.7 million worth of shares. Route One Investment Company, Alua Capital Management, and Deccan Value 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 General Equity Partners allocated the biggest weight to Herbalife Nutrition Ltd. (NYSE:HLF), around 16.06% of its 13F portfolio. Mason Capital Management is also relatively very bullish on the stock, earmarking 11.18 percent of its 13F equity portfolio to HLF.

Since Herbalife Nutrition Ltd. (NYSE:HLF) has witnessed declining sentiment from the aggregate hedge fund industry, it's easy to see that there were a few hedge funds that elected to cut their full holdings in the first quarter. At the top of the heap, Israel Englander's Millennium Management sold off the biggest stake of all the hedgies tracked by Insider Monkey, comprising close to $15.5 million in stock, and Sander Gerber's Hudson Bay Capital Management was right behind this move, as the fund dropped about $4.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds in the first quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Herbalife Nutrition Ltd. (NYSE:HLF) but similarly valued. We will take a look at Bank OZK (NASDAQ:OZK), Kemper Corporation (NYSE:KMPR), Oscar Health, Inc. (NYSE:OSCR), EQT Corporation (NYSE:EQT), Chart Industries, Inc. (NASDAQ:GTLS), Cabot Microelectronics Corporation (NASDAQ:CCMP), and CoreSite Realty Corp (NYSE:COR). All of these stocks' market caps match HLF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OZK,25,237162,5 KMPR,11,43239,-2 OSCR,26,1337245,26 EQT,35,437253,-8 GTLS,19,297275,-7 CCMP,19,281932,-3 COR,15,173361,1 Average,21.4,401067,1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $401 million. That figure was $1995 million in HLF's case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Herbalife Nutrition Ltd. (NYSE:HLF) is more popular among hedge funds. Our overall hedge fund sentiment score for HLF is 81.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 19.3% in 2021 through June 25th but still managed to beat the market by 4.8 percentage points. Hedge funds were also right about betting on HLF as the stock returned 19.5% since the end of March (through 6/25) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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