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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Hawkins, Inc. (NASDAQ:HWKN).
Is HWKN a good stock to buy now? Hedge funds were becoming more confident. The number of long hedge fund bets rose by 2 recently. Hawkins, Inc. (NASDAQ:HWKN) was in 11 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HWKN 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
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 go over the latest hedge fund action regarding Hawkins, Inc. (NASDAQ:HWKN).
Do Hedge Funds Think HWKN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in HWKN a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Hawkins, Inc. (NASDAQ:HWKN), with a stake worth $8 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $4 million. Arrowstreet Capital, Citadel Investment Group, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Hawkins, Inc. (NASDAQ:HWKN), around 0.45% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to HWKN.
Now, specific money managers were breaking ground themselves. AQR Capital Management, managed by Cliff Asness, assembled the most outsized position in Hawkins, Inc. (NASDAQ:HWKN). AQR Capital Management had $1 million invested in the company at the end of the quarter. Mario Gabelli's GAMCO Investors also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new HWKN investors: David Harding's Winton Capital Management, Greg Eisner's Engineers Gate Manager, and Peter Muller's PDT Partners.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Hawkins, Inc. (NASDAQ:HWKN) but similarly valued. We will take a look at Invesco Mortgage Capital Inc (NYSE:IVR), Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM), GAN Limited (NASDAQ:GAN), DMC Global Inc. (NASDAQ:BOOM), Northfield Bancorp, Inc. (Staten Island, NY) (NASDAQ:NFBK), US Concrete Inc (NASDAQ:USCR), and Homology Medicines, Inc. (NASDAQ:FIXX). All of these stocks' market caps are similar to HWKN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IVR,9,13722,-3 MIRM,9,179296,-4 GAN,7,22574,-4 BOOM,6,8271,-3 NFBK,8,28193,1 USCR,9,25583,0 FIXX,11,18591,-5 Average,8.4,42319,-2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.4 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $18 million in HWKN's case. Homology Medicines, Inc. (NASDAQ:FIXX) is the most popular stock in this table. On the other hand DMC Global Inc. (NASDAQ:BOOM) is the least popular one with only 6 bullish hedge fund positions. Hawkins, Inc. (NASDAQ:HWKN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HWKN is 87. 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. Hedge funds were also right about betting on HWKN as the stock returned 18.2% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.