Do Hedge Funds Love Herman Miller, Inc. (MLHR)?

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Herman Miller, Inc. (NASDAQ:MLHR) and see how the stock is affected by the recent hedge fund activity.

Herman Miller, Inc. (NASDAQ:MLHR) has experienced an increase in enthusiasm from smart money lately. At the end of this article, we will also compare Herman Miller, Inc. (NASDAQ:MLHR) to other stocks, including Zendesk Inc (NYSE:ZEN), DineEquity Inc (NYSE:DIN), and ICU Medical, Incorporated (NASDAQ:ICUI) to get a better sense of its popularity.

If you’d ask most traders, hedge funds are seen as unimportant, old investment vehicles of years past. While there are over 8000 funds trading today, We choose to focus on the aristocrats of this group, around 700 funds. It is estimated that this group of investors presides over bulk of all hedge funds’ total asset base, and by shadowing their finest stock picks, Insider Monkey has unearthed a number of investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, let’s check out the key action surrounding Herman Miller, Inc. (NASDAQ:MLHR).

What does the smart money think about Herman Miller, Inc. (NASDAQ:MLHR)?

At the end of Q3, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 13% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Anchor Bolt Capital, managed by Robert Polak, holds the number one position in Herman Miller, Inc. (NASDAQ:MLHR). Anchor Bolt Capital has an $18.4 million position in the stock, comprising 0.6% of its 13F portfolio. On Anchor Bolt Capital’s heels is SG Capital Management, managed by Ken Grossman and Glen Schneider, which holds a $16.3 million position; the fund has 3.6% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Joel Greenblatt’s Gotham Asset Management, Chuck Royce’s Royce & Associates, and Tom Russo’s Gardner Russo & Gardner.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. SG Capital Management, managed by Ken Grossman and Glen Schneider, established the most outsized position in Herman Miller, Inc. (NASDAQ:MLHR). SG Capital Management had $16.3 million invested in the company at the end of the quarter. Mark Coe’s Coe Capital Management also initiated a $1.4 million position during the quarter. The following funds were also among the new MLHR investors: Ken Brodkowitz and Mike Vermut’s Newland Capital, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Chao Ku’s Nine Chapters Capital Management.

Let’s now review hedge fund activity in other stocks similar to Herman Miller, Inc. (NASDAQ:MLHR). We will take a look at Zendesk Inc (NYSE:ZEN), DineEquity Inc (NYSE:DIN), ICU Medical, Incorporated (NASDAQ:ICUI), and EXACT Sciences Corporation (NASDAQ:EXAS). This group of stocks’ market valuations resembles Herman Miller, Inc. (NASDAQ:MLHR)’s market valuation.

As you can see, these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $127 million in Herman Miller, Inc. (NASDAQ:MLHR)’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand, DineEquity Inc (NYSE:DIN) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks, Herman Miller, Inc. (NASDAQ:MLHR) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.