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Where Do Hedge Funds Stand On HCI Group Inc (HCI)?

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·6 min read
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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about HCI Group Inc (NYSE:HCI).

Hedge fund interest in HCI Group Inc (NYSE:HCI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that HCI isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as The Gorman-Rupp Company (NYSE:GRC), Stoke Therapeutics, Inc. (NASDAQ:STOK), and NetSTREIT Corp. (NYSE:NTST) to gather more data points.

Matthew Hulsizer PEAK6 Capital
Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we're going to take a peek at the fresh hedge fund action surrounding HCI Group Inc (NYSE:HCI).

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

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in HCI a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is HCI A Good Stock To Buy?
Is HCI A Good Stock To Buy?

The largest stake in HCI Group Inc (NYSE:HCI) was held by Park West Asset Management, which reported holding $35.8 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $24.2 million position. Other investors bullish on the company included Renaissance Technologies, Royce & Associates, and Alyeska Investment Group. In terms of the portfolio weights assigned to each position One Fin Capital Management allocated the biggest weight to HCI Group Inc (NYSE:HCI), around 2.63% of its 13F portfolio. Fort Baker Capital Management is also relatively very bullish on the stock, designating 1.07 percent of its 13F equity portfolio to HCI.

Seeing as HCI Group Inc (NYSE:HCI) has experienced bearish sentiment from hedge fund managers, logic holds that there lies a certain "tier" of hedgies that elected to cut their entire stakes heading into Q4. Intriguingly, Ken Griffin's Citadel Investment Group cut the largest position of the "upper crust" of funds followed by Insider Monkey, totaling an estimated $77.3 million in stock. Carson Yost's fund, Yost Capital Management, also sold off its stock, about $7.5 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks similar to HCI Group Inc (NYSE:HCI). These stocks are The Gorman-Rupp Company (NYSE:GRC), Stoke Therapeutics, Inc. (NASDAQ:STOK), NetSTREIT Corp. (NYSE:NTST), Gracell Biotechnologies Inc. (NASDAQ:GRCL), Viad Corp (NYSE:VVI), ON24, Inc. (NYSE:ONTF), and Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX). This group of stocks' market values are closest to HCI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GRC,7,25616,-1 STOK,11,113177,-3 NTST,12,92479,2 GRCL,7,154765,-2 VVI,12,129365,-2 ONTF,21,225570,8 SNDX,28,431533,3 Average,14,167501,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $150 million in HCI's case. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is the most popular stock in this table. On the other hand The Gorman-Rupp Company (NYSE:GRC) is the least popular one with only 7 bullish hedge fund positions. HCI Group Inc (NYSE:HCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HCI is 68.3. 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. 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 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately HCI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on HCI were disappointed as the stock returned -24.3% since the end of September (through 12/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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