At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Hill-Rom Holdings, Inc. (NYSE:HRC) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 29 hedge funds' portfolios at the end of March. At the end of this article we will also compare HRC to other stocks including Signature Bank (NASDAQ:SBNY), Medical Properties Trust, Inc. (NYSE:MPW), and Tallgrass Energy, LP (NYSE:TGE) to get a better sense of its popularity.
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. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to view the fresh hedge fund action surrounding Hill-Rom Holdings, Inc. (NYSE:HRC).
How are hedge funds trading Hill-Rom Holdings, Inc. (NYSE:HRC)?
At Q1's end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards HRC over the last 15 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Hill-Rom Holdings, Inc. (NYSE:HRC) was held by Fisher Asset Management, which reported holding $116.3 million worth of stock at the end of March. It was followed by Millennium Management with a $113.6 million position. Other investors bullish on the company included Select Equity Group, Polar Capital, and Renaissance Technologies.
Seeing as Hill-Rom Holdings, Inc. (NYSE:HRC) has faced bearish sentiment from the smart money, logic holds that there was a specific group of funds that decided to sell off their positions entirely last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the largest investment of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $4.1 million in stock, and Matthew Tewksbury's Stevens Capital Management was right behind this move, as the fund cut about $1.3 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Hill-Rom Holdings, Inc. (NYSE:HRC). These stocks are Signature Bank (NASDAQ:SBNY), Medical Properties Trust, Inc. (NYSE:MPW), Tallgrass Energy, LP (NYSE:TGE), and Jones Lang LaSalle Inc (NYSE:JLL). All of these stocks' market caps match HRC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBNY,36,649446,0 MPW,13,220718,-3 TGE,11,36489,3 JLL,23,940107,4 Average,20.75,461690,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $462 million. That figure was $622 million in HRC's case. Signature Bank (NASDAQ:SBNY) is the most popular stock in this table. On the other hand Tallgrass Energy, LP (NYSE:TGE) is the least popular one with only 11 bullish hedge fund positions. Hill-Rom Holdings, Inc. (NYSE:HRC) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately HRC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HRC were disappointed as the stock returned -9% during the same 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.