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Should You Start Taking Profits in Hill International (HIL)?

Greystone Capital Management, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly median account return of +3.1% net of fees was recorded by the fund for the second quarter of 2021, compared unfavorably to the S&P 500 and Russell 2000 returns of +8.4% and +4.2% for the quarter, and favorably to year to date returns of +15.1% and +17.4% . You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Greystone Capital Management, the fund mentioned Hill International, Inc. (NYSE: HIL), and discussed its stance on the firm. Hill International, Inc. is a Philadelphia, Pennsylvania-based management consulting company, that currently has a $125.1 million market capitalization. HIL delivered a 15.10% return since the beginning of the year, extending its 12-month returns to 52.41%. The stock closed at $2.21 per share on July 27, 2021.

Here is what Greystone Capital Management has to say about Hill International, Inc. in its Q2 2021 investor letter:

"I also exited client positions in Hill International, largely for the same reasons outlined above, as opportunity cost can be a good driver of sell decisions depending on the current opportunity set. Our investment in HIL over the multiple years we owned the business returned anywhere from breakeven to +40%. With a large infrastructure bill on the horizon, improvement within their Middle East operations and the resumption of COVID-related project delays and deferments, I believe 2021 should be a positive year for HIL. It’s possible that the business will be sold at some point in the future at a price higher than what we paid, but the turnaround has been a bit more muted than I originally anticipated and I feel as though I have better places to invest your capital."

Photo by DocuSign on Unsplash

Based on our calculations, Hill International, Inc. (NYSE: HIL) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. HILL was in 7 hedge fund portfolios at the end of the first quarter of 2021, compared to 9 funds in the fourth quarter of 2020. Hill International, Inc. (NYSE: HIL) delivered a -18.15% return in the past 3 months.

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 115 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage.

Disclosure: None. This article is originally published at Insider Monkey.