Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Hedge fund interest in Haymaker Acquisition Corp. (NASDAQ:HYAC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare HYAC to other stocks including Community Health Systems (NYSE:CYH), Donegal Group Inc (NASDAQ:DGICA), and Ares Commercial Real Estate Corp (NYSE:ACRE) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a peek at the new hedge fund action surrounding Haymaker Acquisition Corp. (NASDAQ:HYAC).
What have hedge funds been doing with Haymaker Acquisition Corp. (NASDAQ:HYAC)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, representing no change from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HYAC over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, BlueCrest Capital Mgmt. was the largest shareholder of Haymaker Acquisition Corp. (NASDAQ:HYAC), with a stake worth $16.8 million reported as of the end of September. Trailing BlueCrest Capital Mgmt. was Angelo Gordon & Co, which amassed a stake valued at $11.7 million. BlueCrest Capital Mgmt., Glazer Capital, and Angelo Gordon & Co were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Haymaker Acquisition Corp. (NASDAQ:HYAC) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers who sold off their positions entirely last quarter. Intriguingly, Jamie Mendola’s Pacific Grove Capital sold off the biggest investment of all the hedgies monitored by Insider Monkey, comprising close to $0.5 million in stock, and James Dondero’s Highland Capital Management was right behind this move, as the fund said goodbye to about $0.2 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Haymaker Acquisition Corp. (NASDAQ:HYAC). We will take a look at Community Health Systems (NYSE:CYH), Donegal Group Inc (NASDAQ:DGICA), Ares Commercial Real Estate Corp (NYSE:ACRE), and Century Bancorp, Inc. (NASDAQ:CNBKA). All of these stocks’ market caps are similar to HYAC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYH | 22 | 56884 | -2 |
| DGICA | 5 | 8130 | 0 |
| ACRE | 5 | 9936 | -2 |
| CNBKA | 3 | 11234 | 0 |
| Average | 8.75 | 21546 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $64 million in HYAC’s case. Community Health Systems (NYSE:CYH) is the most popular stock in this table. On the other hand Century Bancorp, Inc. (NASDAQ:CNBKA) is the least popular one with only 3 bullish hedge fund positions. Haymaker Acquisition Corp. (NASDAQ:HYAC) 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 CYH might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.