Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Horace Mann Educators Corporation (NYSE:HMN).
Horace Mann Educators Corporation (NYSE:HMN) investors should pay attention to an increase in hedge fund interest of late. Our calculations also showed that HMN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are over 8000 funds in operation today, Our experts hone in on the crème de la crème of this group, around 750 funds. These investment experts manage most of the hedge fund industry’s total capital, and by keeping an eye on their best equity investments, Insider Monkey has identified numerous investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the key hedge fund action encompassing Horace Mann Educators Corporation (NYSE:HMN).
What does smart money think about Horace Mann Educators Corporation (NYSE:HMN)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in HMN a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Ariel Investments was the largest shareholder of Horace Mann Educators Corporation (NYSE:HMN), with a stake worth $11.4 million reported as of the end of September. Trailing Ariel Investments was Renaissance Technologies, which amassed a stake valued at $9.5 million. Citadel Investment Group, Millennium Management, and GLG Partners 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 Ariel Investments allocated the biggest weight to Horace Mann Educators Corporation (NYSE:HMN), around 0.15% of its 13F portfolio. Ellington is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to HMN.
Consequently, key hedge funds were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, assembled the most valuable position in Horace Mann Educators Corporation (NYSE:HMN). ExodusPoint Capital had $0.6 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners and Paul Marshall and Ian Wace’s Marshall Wace.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Horace Mann Educators Corporation (NYSE:HMN) but similarly valued. We will take a look at LGI Homes Inc (NASDAQ:LGIH), The RealReal, Inc. (NASDAQ:REAL), Agios Pharmaceuticals Inc (NASDAQ:AGIO), and Mednax Inc. (NYSE:MD). This group of stocks’ market valuations match HMN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LGIH | 14 | 130437 | 2 |
| REAL | 20 | 83144 | -13 |
| AGIO | 17 | 103178 | -1 |
| MD | 19 | 265778 | 1 |
| Average | 17.5 | 145634 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $35 million in HMN’s case. The RealReal, Inc. (NASDAQ:REAL) is the most popular stock in this table. On the other hand LGI Homes Inc (NASDAQ:LGIH) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Horace Mann Educators Corporation (NYSE:HMN) is even less popular than LGIH. Hedge funds dodged a bullet by taking a bearish stance towards HMN. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HMN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HMN investors were disappointed as the stock returned -6.3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
