Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.3% in 2019 and outperformed the broader market benchmark by 10.1 percentage points. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Herman Miller, Inc. (NASDAQ:MLHR) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. MLHR was in 26 hedge funds’ portfolios at the end of the third quarter of 2019. There were 25 hedge funds in our database with MLHR holdings at the end of the previous quarter. Our calculations also showed that MLHR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
According to most investors, hedge funds are assumed to be slow, outdated investment tools of yesteryear. While there are over 8000 funds trading at present, Our researchers hone in on the leaders of this group, approximately 750 funds. These investment experts handle the lion’s share of all hedge funds’ total asset base, and by tailing their best investments, Insider Monkey has unsheathed numerous investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a 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 .
Joel Greenblatt of Gotham Asset Management
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let’s check out the new hedge fund action regarding Herman Miller, Inc. (NASDAQ:MLHR).
What does smart money think about Herman Miller, Inc. (NASDAQ:MLHR)?
Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in MLHR over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Herman Miller, Inc. (NASDAQ:MLHR), which was worth $87.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $25.5 million worth of shares. GLG Partners, Renaissance Technologies, and Royce & Associates 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 Zebra Capital Management allocated the biggest weight to Herman Miller, Inc. (NASDAQ:MLHR), around 1.02% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, setting aside 0.69 percent of its 13F equity portfolio to MLHR.
As one would reasonably expect, key money managers were leading the bulls’ herd. Gotham Asset Management, managed by Joel Greenblatt, created the most outsized position in Herman Miller, Inc. (NASDAQ:MLHR). Gotham Asset Management had $2.1 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe’s Voleon Capital also made a $1.2 million investment in the stock during the quarter. The only other fund with a brand new MLHR position is Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Herman Miller, Inc. (NASDAQ:MLHR) but similarly valued. These stocks are EQT Corporation (NYSE:EQT), Gol Linhas Aereas Inteligentes SA (NYSE:GOL), Enphase Energy Inc (NASDAQ:ENPH), and Rattler Midstream LP (NASDAQ:RTLR). This group of stocks’ market valuations match MLHR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQT | 35 | 442221 | 0 |
| GOL | 11 | 194286 | 3 |
| ENPH | 32 | 289899 | 12 |
| RTLR | 11 | 163347 | -9 |
| Average | 22.25 | 272438 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $210 million in MLHR’s case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Gol Linhas Aereas Inteligentes SA (NYSE:GOL) is the least popular one with only 11 bullish hedge fund positions. Herman Miller, Inc. (NASDAQ:MLHR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on MLHR, though not to the same extent, as the stock returned 40.5% during 2019 and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
