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Is Hillenbrand, Inc. (NYSE:HI) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hillenbrand, Inc. (NYSE:HI) was in 22 hedge funds' portfolios at the end of the third quarter of 2019. HI investors should pay attention to an increase in hedge fund sentiment of late. There were 18 hedge funds in our database with HI holdings at the end of the previous quarter. Our calculations also showed that HI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Paul Marshall of Marshall Wace[/caption]
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. We're going to review the fresh hedge fund action encompassing Hillenbrand, Inc. (NYSE:HI).
How have hedgies been trading Hillenbrand, Inc. (NYSE:HI)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in HI a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, John Overdeck and David Siegel's Two Sigma Advisors has the most valuable position in Hillenbrand, Inc. (NYSE:HI), worth close to $19.9 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Marshall Wace, managed by Paul Marshall and Ian Wace, which holds a $19.1 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish include Renaissance Technologies, Israel Englander's Millennium Management and Noam Gottesman's GLG Partners. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Hillenbrand, Inc. (NYSE:HI), around 0.21% of its 13F portfolio. Marshall Wace is also relatively very bullish on the stock, setting aside 0.15 percent of its 13F equity portfolio to HI.
As aggregate interest increased, key hedge funds have jumped into Hillenbrand, Inc. (NYSE:HI) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, established the largest position in Hillenbrand, Inc. (NYSE:HI). Marshall Wace had $19.1 million invested in the company at the end of the quarter. Charles Paquelet's Skylands Capital also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Mike Vranos's Ellington and Michael Gelband's ExodusPoint Capital.
Let's now take a look at hedge fund activity in other stocks similar to Hillenbrand, Inc. (NYSE:HI). These stocks are Stitch Fix, Inc. (NASDAQ:SFIX), Sogou Inc. (NYSE:SOGO), Matador Resources Co (NYSE:MTDR), and Four Corners Property Trust, Inc. (NYSE:FCPT). This group of stocks' market caps resemble HI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SFIX,23,124598,-5 SOGO,4,5194,-1 MTDR,14,224980,2 FCPT,17,120222,-4 Average,14.5,118749,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $123 million in HI's case. Stitch Fix, Inc. (NASDAQ:SFIX) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) is the least popular one with only 4 bullish hedge fund positions. Hillenbrand, Inc. (NYSE:HI) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HI were disappointed as the stock returned 2.4% during the fourth quarter (through the end of November) 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.