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Were Hedge Funds Right About Houlihan Lokey Inc (HLI)?

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  • HLI
  • ^GSPC

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 fourth 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 6 years and analyze what the smart money thinks of Houlihan Lokey Inc (NYSE:HLI) based on that data.

Houlihan Lokey Inc (NYSE:HLI) investors should be aware of a decrease in support from the world's most elite money managers in recent months. Houlihan Lokey Inc (NYSE:HLI) was in 16 hedge funds' portfolios at the end of March. The all time high for this statistic is 26. Our calculations also showed that HLI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the eyes of most investors, hedge funds are viewed as underperforming, old investment tools of the past. While there are more than 8000 funds with their doors open at the moment, Our experts look at the top tier of this club, approximately 850 funds. These hedge fund managers oversee the lion's share of all hedge funds' total capital, and by monitoring their first-class stock picks, Insider Monkey has uncovered a few investment strategies that have historically outstripped the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

John Rogers’ Top 10 Stock Picks
John Rogers’ Top 10 Stock Picks

John Rogers of Ariel Investments

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 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Now we're going to go over the key hedge fund action surrounding Houlihan Lokey Inc (NYSE:HLI).

Do Hedge Funds Think HLI Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HLI over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Is HLI A Good Stock To Buy?
Is HLI A Good Stock To Buy?

The largest stake in Houlihan Lokey Inc (NYSE:HLI) was held by Royce & Associates, which reported holding $39.4 million worth of stock at the end of December. It was followed by Ariel Investments with a $26.5 million position. Other investors bullish on the company included Ancora Advisors, Montanaro Asset Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Montanaro Asset Management allocated the biggest weight to Houlihan Lokey Inc (NYSE:HLI), around 1.75% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.49 percent of its 13F equity portfolio to HLI.

Judging by the fact that Houlihan Lokey Inc (NYSE:HLI) has witnessed falling interest from the entirety of the hedge funds we track, it's easy to see that there were a few money managers who sold off their positions entirely last quarter. Interestingly, Israel Englander's Millennium Management cut the biggest stake of the 750 funds watched by Insider Monkey, worth about $8 million in stock. Daniel Johnson's fund, Gillson Capital, also said goodbye to its stock, about $3.6 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 10 funds last quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Houlihan Lokey Inc (NYSE:HLI) but similarly valued. We will take a look at Leslie's, Inc. (NASDAQ:LESL), Kornit Digital Ltd. (NASDAQ:KRNT), National Beverage Corp. (NASDAQ:FIZZ), Blackstone Mortgage Trust Inc (NYSE:BXMT), National Fuel Gas Company (NYSE:NFG), Asana Inc. (NYSE:ASAN), and ShockWave Medical, Inc. (NASDAQ:SWAV). All of these stocks' market caps are closest to HLI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LESL,27,285809,5 KRNT,24,153853,9 FIZZ,15,258478,-6 BXMT,16,209515,-1 NFG,16,92712,3 ASAN,22,374549,4 SWAV,17,219798,-5 Average,19.6,227816,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $126 million in HLI's case. Leslie's, Inc. (NASDAQ:LESL) is the most popular stock in this table. On the other hand National Beverage Corp. (NASDAQ:FIZZ) is the least popular one with only 15 bullish hedge fund positions. Houlihan Lokey Inc (NYSE:HLI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HLI is 17.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on HLI as the stock returned 30.2% since the end of the first quarter (through 7/23) and outperformed the market by an even larger margin.

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