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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Hexcel Corporation (NYSE:HXL) based on that data.
Is HXL a good stock to buy now? The best stock pickers were becoming more confident. The number of bullish hedge fund bets improved by 2 lately. Hexcel Corporation (NYSE:HXL) was in 20 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 30. Our calculations also showed that HXL 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). There were 18 hedge funds in our database with HXL holdings at the end of June.
Video: 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 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 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.
Michael Price of MFP 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. With all of this in mind we're going to take a look at the recent hedge fund action encompassing Hexcel Corporation (NYSE:HXL).
Do Hedge Funds Think HXL Is A Good Stock To Buy Now?
At the end of September, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the second quarter of 2020. On the other hand, there were a total of 27 hedge funds with a bullish position in HXL a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Eagle Capital Management held the most valuable stake in Hexcel Corporation (NYSE:HXL), which was worth $82.4 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $20.7 million worth of shares. Two Sigma Advisors, Fairpointe Capital, and MFP Investors 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 Fairpointe Capital allocated the biggest weight to Hexcel Corporation (NYSE:HXL), around 1.72% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, setting aside 1.63 percent of its 13F equity portfolio to HXL.
As one would reasonably expect, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the largest position in Hexcel Corporation (NYSE:HXL). Millennium Management had $8.9 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also initiated a $5.7 million position during the quarter. The following funds were also among the new HXL investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Greg Eisner's Engineers Gate Manager, and Mika Toikka's AlphaCrest Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Hexcel Corporation (NYSE:HXL) but similarly valued. We will take a look at Radian Group Inc (NYSE:RDN), Triton International Limited (NYSE:TRTN), Select Medical Holdings Corporation (NYSE:SEM), Laureate Education, Inc. (NASDAQ:LAUR), United Bankshares, Inc. (NASDAQ:UBSI), FireEye Inc (NASDAQ:FEYE), and Trupanion Inc (NYSE:TRUP). This group of stocks' market values resemble HXL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RDN,38,300642,5 TRTN,16,164268,2 SEM,22,114598,0 LAUR,25,225833,-6 UBSI,19,39243,3 FEYE,28,162203,0 TRUP,12,265969,-3 Average,22.9,181822,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $176 million in HXL's case. Radian Group Inc (NYSE:RDN) is the most popular stock in this table. On the other hand Trupanion Inc (NYSE:TRUP) is the least popular one with only 12 bullish hedge fund positions. Hexcel Corporation (NYSE:HXL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HXL is 42.4. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on HXL as the stock returned 48.7% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.