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 Hawaiian Electric Industries, Inc. (NYSE:HE).
Is Hawaiian Electric Industries, Inc. (NYSE:HE) a splendid stock to buy now? Hedge funds were taking an optimistic view. The number of bullish hedge fund positions went up by 3 lately. Hawaiian Electric Industries, Inc. (NYSE:HE) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HE 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 16 hedge funds in our database with HE holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. With all of this in mind we're going to analyze the key hedge fund action regarding Hawaiian Electric Industries, Inc. (NYSE:HE).
Do Hedge Funds Think HE Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in HE over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Hawaiian Electric Industries, Inc. (NYSE:HE), which was worth $17.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $12.3 million worth of shares. Winton Capital Management, GLG Partners, and Marshall Wace LLP 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 Winton Capital Management allocated the biggest weight to Hawaiian Electric Industries, Inc. (NYSE:HE), around 0.13% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to HE.
As industrywide interest jumped, some big names were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in Hawaiian Electric Industries, Inc. (NYSE:HE). Marshall Wace LLP had $3.6 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $3 million position during the quarter. The following funds were also among the new HE investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Mario Gabelli's GAMCO Investors, and Dmitry Balyasny's Balyasny Asset Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Hawaiian Electric Industries, Inc. (NYSE:HE) but similarly valued. We will take a look at BOK Financial Corporation (NASDAQ:BOKF), Devon Energy Corporation (NYSE:DVN), Madison Square Garden Sports Corp. (NYSE:MSGS), Rayonier Inc. (NYSE:RYN), Eagle Materials, Inc. (NYSE:EXP), Grocery Outlet Holding Corp. (NASDAQ:GO), and Halozyme Therapeutics, Inc. (NASDAQ:HALO). This group of stocks' market valuations are closest to HE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BOKF,21,230187,4 DVN,44,537717,-1 MSGS,48,967024,5 RYN,17,303710,0 EXP,31,472642,-10 GO,18,119079,-1 HALO,26,206784,0 Average,29.3,405306,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $405 million. That figure was $56 million in HE's case. Madison Square Garden Sports Corp. (NYSE:MSGS) is the most popular stock in this table. On the other hand Rayonier Inc. (NYSE:RYN) is the least popular one with only 17 bullish hedge fund positions. Hawaiian Electric Industries, Inc. (NYSE:HE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HE is 41.2. 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 HE as the stock returned 10.7% 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.