The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let's look at how this market volatility affected the sentiment of hedge funds towards Hubbell Incorporated (NYSE:HUBB), and what that likely means for the prospects of the company and its stock.
Hubbell Incorporated (NYSE:HUBB) investors should be aware of an increase in enthusiasm from smart money in recent months. Our calculations also showed that hubb isn't among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let's review the key hedge fund action regarding Hubbell Incorporated (NYSE:HUBB).
What does the smart money think about Hubbell Incorporated (NYSE:HUBB)?
At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HUBB over the last 13 quarters. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Hubbell Incorporated (NYSE:HUBB), with a stake worth $132.7 million reported as of the end of September. Trailing Citadel Investment Group was Royce & Associates, which amassed a stake valued at $118.5 million. Millennium Management, Impax Asset Management, and Carlson Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, some big names have jumped into Hubbell Incorporated (NYSE:HUBB) headfirst. Scopus Asset Management, managed by Alexander Mitchell, established the most outsized position in Hubbell Incorporated (NYSE:HUBB). Scopus Asset Management had $22.1 million invested in the company at the end of the quarter. Bain Capital's Brookside Capital also made a $8.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Gregg Moskowitz's Interval Partners, Anand Parekh's Alyeska Investment Group, and Daniel Arbess's Perella Weinberg Partners.
Let's now review hedge fund activity in other stocks similar to Hubbell Incorporated (NYSE:HUBB). These stocks are Jefferies Financial Group Inc. (NYSE:JEF), Affiliated Managers Group, Inc. (NYSE:AMG), Ubiquiti Networks Inc (NASDAQ:UBNT), and Enable Midstream Partners LP (NYSE:ENBL). All of these stocks' market caps resemble HUBB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JEF,39,724586,5 AMG,32,732597,6 UBNT,16,336685,1 ENBL,4,12258,1 Average,22.75,451532,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $452 million. That figure was $780 million in HUBB's case. Jefferies Financial Group Inc. (NYSE:JEF) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 4 bullish hedge fund positions. Hubbell Incorporated (NYSE:HUBB) 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. In this regard JEF might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.