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Were Hedge Funds Right About Flocking Into Hooker Furniture Corporation (HOFT) ?

Abigail Fisher

Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first quarter, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first quarter still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Hooker Furniture Corporation (NASDAQ:HOFT) changed recently.

Hooker Furniture Corporation (NASDAQ:HOFT) investors should be aware of an increase in hedge fund interest in recent months. Our calculations also showed that HOFT isn't among the 30 most popular stocks among hedge funds.

At the moment there are a lot of indicators market participants can use to appraise publicly traded companies. Two of the most under-the-radar indicators are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top money managers can outpace the broader indices by a very impressive amount (see the details here).

Millennium Management, Catapult Capital Management

We're going to analyze the new hedge fund action regarding Hooker Furniture Corporation (NASDAQ:HOFT).

How have hedgies been trading Hooker Furniture Corporation (NASDAQ:HOFT)?

Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in HOFT a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

HOFT_june2019

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce's Royce & Associates has the biggest position in Hooker Furniture Corporation (NASDAQ:HOFT), worth close to $50.4 million, amounting to 0.4% of its total 13F portfolio. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $7.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish consist of Israel Englander's Millennium Management, Cliff Asness's AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Now, some big names were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in Hooker Furniture Corporation (NASDAQ:HOFT). Arrowstreet Capital had $1.7 million invested in the company at the end of the quarter. Roger Ibbotson's Zebra Capital Management also made a $0.2 million investment in the stock during the quarter.

Let's now take a look at hedge fund activity in other stocks similar to Hooker Furniture Corporation (NASDAQ:HOFT). These stocks are Eagle Bulk Shipping Inc. (NASDAQ:EGLE), Farmer Brothers Co. (NASDAQ:FARM), Summit Financial Group, Inc. (NASDAQ:SMMF), and ChannelAdvisor Corp (NYSE:ECOM). All of these stocks' market caps are closest to HOFT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EGLE,10,205207,0 FARM,7,56386,-2 SMMF,2,9075,0 ECOM,14,62386,3 Average,8.25,83264,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $67 million in HOFT's case. ChannelAdvisor Corp (NYSE:ECOM) is the most popular stock in this table. On the other hand Summit Financial Group, Inc. (NASDAQ:SMMF) is the least popular one with only 2 bullish hedge fund positions. Hooker Furniture Corporation (NASDAQ:HOFT) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately HOFT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HOFT were disappointed as the stock returned -30.1% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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