Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first half of 2019. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Hexcel Corporation (NYSE:HXL) to find out whether it was one of their high conviction long-term ideas.
Hexcel Corporation (NYSE:HXL) has seen a decrease in hedge fund interest in recent months. HXL was in 23 hedge funds' portfolios at the end of June. There were 25 hedge funds in our database with HXL positions at the end of the previous quarter. Our calculations also showed that HXL isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are numerous metrics market participants have at their disposal to grade stocks. Some of the less utilized metrics are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the best fund managers can trounce the market by a very impressive amount (see the details here).
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a gander at the latest hedge fund action regarding Hexcel Corporation (NYSE:HXL).
What have hedge funds been doing with Hexcel Corporation (NYSE:HXL)?
Heading into the third quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in HXL a year ago. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D. E. Shaw's D E Shaw has the biggest position in Hexcel Corporation (NYSE:HXL), worth close to $27.2 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $19.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions consist of Renaissance Technologies, Robert Karr's Joho Capital and Tom Gayner's Markel Gayner Asset Management.
Since Hexcel Corporation (NYSE:HXL) has experienced falling interest from the smart money, it's safe to say that there is a sect of hedgies who sold off their full holdings by the end of the second quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the largest position of all the hedgies monitored by Insider Monkey, comprising about $11.1 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also sold off its stock, about $4.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the second quarter.
Let's now review hedge fund activity in other stocks similar to Hexcel Corporation (NYSE:HXL). These stocks are Sealed Air Corporation (NYSE:SEE), Five Below Inc (NASDAQ:FIVE), Proofpoint Inc (NASDAQ:PFPT), and SL Green Realty Corp (NYSE:SLG). This group of stocks' market caps are closest to HXL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEE,27,1009952,-2 FIVE,38,550414,0 PFPT,36,566584,3 SLG,15,276468,-4 Average,29,600855,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $601 million. That figure was $151 million in HXL's case. Five Below Inc (NASDAQ:FIVE) is the most popular stock in this table. On the other hand SL Green Realty Corp (NYSE:SLG) is the least popular one with only 15 bullish hedge fund positions. Hexcel Corporation (NYSE:HXL) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HXL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HXL investors were disappointed as the stock returned 1.8% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.