The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Hasbro, Inc. (NASDAQ:HAS), and what that likely means for the prospects of the company and its stock.
Hasbro, Inc. (NASDAQ:HAS) was in 20 hedge funds’ portfolios at the end of September. HAS investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 17 hedge funds in our database with HAS holdings at the end of the previous quarter. Our calculations also showed that has isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
We’re going to take a peek at the new hedge fund action encompassing Hasbro, Inc. (NASDAQ:HAS).
What does the smart money think about Hasbro, Inc. (NASDAQ:HAS)?
At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in HAS at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Hasbro, Inc. (NASDAQ:HAS) was held by Point72 Asset Management, which reported holding $74.1 million worth of stock at the end of September. It was followed by Chilton Investment Company with a $70.7 million position. Other investors bullish on the company included Millennium Management, Markel Gayner Asset Management, and Citadel Investment Group.
Consequently, key money managers have jumped into Hasbro, Inc. (NASDAQ:HAS) headfirst. Point72 Asset Management, managed by Steve Cohen, established the most valuable call position in Hasbro, Inc. (NASDAQ:HAS). Point72 Asset Management had $74.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $40.4 million position during the quarter. The other funds with brand new HAS positions are Sander Gerber’s Hudson Bay Capital Management, Dennis Leibowitz’s Act II Capital, and Bruce Kovner’s Caxton Associates LP.
Let’s now review hedge fund activity in other stocks similar to Hasbro, Inc. (NASDAQ:HAS). We will take a look at Annaly Capital Management, Inc. (NYSE:NLY), Diamondback Energy Inc (NASDAQ:FANG), Alexandria Real Estate Equities Inc (NYSE:ARE), and Conagra Brands, Inc. (NYSE:CAG). This group of stocks’ market valuations are similar to HAS’s market valuation.
Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NLY | 23 | 346629 | 7 |
| FANG | 37 | 1325118 | 9 |
| ARE | 18 | 354276 | -5 |
| CAG | 38 | 1060012 | 7 |
| Average | 29 | 771509 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $772 million. That figure was $279 million in HAS’s case. Conagra Brands, Inc. (NYSE:CAG) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 18 bullish hedge fund positions. Hasbro, Inc. (NASDAQ:HAS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CAG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
