Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 30 stock picks easily bested the broader market, at 6.7% compared to 2.6%, despite there being a few duds in there like Facebook (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Herman Miller, Inc. (NASDAQ:MLHR) shareholders have witnessed an increase in hedge fund interest in recent months. Our calculations also showed that mlhr isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
Let’s take a gander at the recent hedge fund action surrounding Herman Miller, Inc. (NASDAQ:MLHR).
What have hedge funds been doing with Herman Miller, Inc. (NASDAQ:MLHR)?
At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the second quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in MLHR at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Herman Miller, Inc. (NASDAQ:MLHR), which was worth $52.4 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $18.1 million worth of shares. Moreover, Millennium Management, GLG Partners, and Renaissance Technologies were also bullish on Herman Miller, Inc. (NASDAQ:MLHR), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the largest position in Herman Miller, Inc. (NASDAQ:MLHR). Millennium Management had $12.6 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $10.3 million position during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Matthew Hulsizer’s PEAK6 Capital Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s go over hedge fund activity in other stocks similar to Herman Miller, Inc. (NASDAQ:MLHR). We will take a look at Jack in the Box Inc. (NASDAQ:JACK), Trustmark Corp (NASDAQ:TRMK), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), and B2Gold Corp (NYSE:BTG). This group of stocks’ market values are similar to MLHR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JACK | 26 | 479638 | 4 |
| TRMK | 11 | 32436 | 1 |
| ARNA | 25 | 411535 | 2 |
| BTG | 14 | 65025 | 2 |
| Average | 19 | 247159 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $135 million in MLHR’s case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand Trustmark Corp (NASDAQ:TRMK) 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard JACK might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
