Does Harman International Industries Inc./DE/ (HAR) Represent A Good Investment?

The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on Harman International Industries Inc./DE/ (NYSE:HAR) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Harman International Industries Inc./DE/ (NYSE:HAR) undervalued? Hedge funds are turning bullish. The number of bullish hedge fund positions advanced by 10 recently. At the end of this article we will also compare HAR to other stocks including IDEXX Laboratories, Inc. (NASDAQ:IDXX), KT Corporation (ADR) (NYSE:KT), and Ashland Inc. (NYSE:ASH) to get a better sense of its popularity.

According to most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are greater than 8000 funds with their doors open at the moment, we hone in on the aristocrats of this club, around 700 funds. These hedge fund managers manage the lion’s share of the hedge fund industry’s total capital, and by monitoring their inimitable stock picks, Insider Monkey has formulated numerous investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to take a peek at the new action encompassing Harman International Industries Inc./DE/ (NYSE:HAR).

How have hedgies been trading Harman International Industries Inc./DE/ (NYSE:HAR)?

Heading into Q4, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 59% from the second quarter. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in Harman International Industries Inc./DE/ (NYSE:HAR). AQR Capital Management has a $80.4 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Edinburgh Partners, managed by Sandy Nairn, which holds a $77.8 million position; the fund has 8.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass Clifford Fox’s Columbus Circle Investors, Hugh Sloane’s Sloane Robinson Investment Management and Israel Englander’s Millennium Management.

Consequently, key hedge funds have been driving this bullishness. Edinburgh Partners, managed by Sandy Nairn, created the most outsized position in Harman International Industries Inc./DE/ (NYSE:HAR). Edinburgh Partners had $77.8 million invested in the company at the end of the quarter. Millennium Management also initiated a $13.2 million position during the quarter. The following funds were also among the new HAR investors: Jim Simons’s Renaissance Technologies, Steve Cohen’s Point72 Asset Management, and Peter Muller’s PDT Partners.

Let’s check out hedge fund activity in other stocks similar to Harman International Industries Inc./DE/ (NYSE:HAR). These stocks are IDEXX Laboratories, Inc. (NASDAQ:IDXX), KT Corporation (ADR) (NYSE:KT), Ashland Inc. (NYSE:ASH), and Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY). This group of stocks’ market values are closest to HAR’s market value.

As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $450 million, versus $404 million in HAR’s case. Ashland Inc. (NYSE:ASH) is the most popular stock in this table. On the other hand, KT Corporation (ADR) (NYSE:KT) is the least popular one with only 9 bullish hedge fund positions. Harman International Industries Inc./DE/ (NYSE:HAR) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ASH might be a better candidate to consider a long position.