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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Horace Mann Educators Corporation (NYSE:HMN).
Is HMN a good stock to buy now? Horace Mann Educators Corporation (NYSE:HMN) investors should pay attention to an increase in hedge fund interest lately. Horace Mann Educators Corporation (NYSE:HMN) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 14. There were 6 hedge funds in our database with HMN positions at the end of the second quarter. Our calculations also showed that HMN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we're going to review the fresh hedge fund action regarding Horace Mann Educators Corporation (NYSE:HMN).
Do Hedge Funds Think HMN Is A Good Stock To Buy Now?
At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 117% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards HMN over the last 21 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Horace Mann Educators Corporation (NYSE:HMN) was held by Ariel Investments, which reported holding $8.6 million worth of stock at the end of September. It was followed by Interval Partners with a $2.5 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Interval Partners allocated the biggest weight to Horace Mann Educators Corporation (NYSE:HMN), around 0.14% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 0.13 percent of its 13F equity portfolio to HMN.
Consequently, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, established the most valuable position in Horace Mann Educators Corporation (NYSE:HMN). Millennium Management had $0.8 million invested in the company at the end of the quarter. Mika Toikka's AlphaCrest Capital Management also initiated a $0.4 million position during the quarter. The other funds with brand new HMN positions are Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, Donald Sussman's Paloma Partners, and Dmitry Balyasny's Balyasny Asset Management.
Let's go over hedge fund activity in other stocks similar to Horace Mann Educators Corporation (NYSE:HMN). We will take a look at The Geo Group, Inc. (NYSE:GEO), Sykes Enterprises, Incorporated (NASDAQ:SYKE), Murphy Oil Corporation (NYSE:MUR), LTC Properties Inc (NYSE:LTC), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), Ebang International Holdings Inc. (NASDAQ:EBON), and WSFS Financial Corporation (NASDAQ:WSFS). This group of stocks' market caps match HMN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GEO,12,65539,-8 SYKE,13,47344,-5 MUR,24,78785,9 LTC,9,10133,-6 ICPT,20,166374,-2 EBON,1,1584,1 WSFS,12,108404,-5 Average,13,68309,-2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $18 million in HMN's case. Murphy Oil Corporation (NYSE:MUR) is the most popular stock in this table. On the other hand Ebang International Holdings Inc. (NASDAQ:EBON) is the least popular one with only 1 bullish hedge fund positions. Horace Mann Educators Corporation (NYSE:HMN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HMN is 63.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on HMN as the stock returned 24.1% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.