Hedge Funds Are Coming Back To Herman Miller, Inc. (MLHR)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Herman Miller, Inc. (NASDAQ:MLHR).

Herman Miller, Inc. (NASDAQ:MLHR) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 28. MLHR investors should be aware of an increase in activity from the world’s largest hedge funds recently. There were 18 hedge funds in our database with MLHR holdings at the end of March. Our calculations also showed that MLHR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are many signals market participants use to size up their stock investments. Some of the most useful signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can beat the S&P 500 by a superb margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Philip Hempleman of Ardsley Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to check out the fresh hedge fund action regarding Herman Miller, Inc. (NASDAQ:MLHR).

Do Hedge Funds Think MLHR Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in MLHR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management has the most valuable position in Herman Miller, Inc. (NASDAQ:MLHR), worth close to $64.4 million, amounting to 1.8% of its total 13F portfolio. The second largest stake is held by Royce & Associates, managed by Chuck Royce, which holds a $37.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management. In terms of the portfolio weights assigned to each position Nantahala Capital Management allocated the biggest weight to Herman Miller, Inc. (NASDAQ:MLHR), around 1.83% of its 13F portfolio. Ardsley Partners is also relatively very bullish on the stock, earmarking 1.05 percent of its 13F equity portfolio to MLHR.

Now, specific money managers have jumped into Herman Miller, Inc. (NASDAQ:MLHR) headfirst. Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, established the biggest position in Herman Miller, Inc. (NASDAQ:MLHR). Nantahala Capital Management had $64.4 million invested in the company at the end of the quarter. Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management also initiated a $23.6 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Philip Hempleman’s Ardsley Partners, and D. E. Shaw’s D E Shaw.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Herman Miller, Inc. (NASDAQ:MLHR) but similarly valued. These stocks are Matson Inc. (NYSE:MATX), Cactus, Inc. (NYSE:WHD), United Community Banks Inc (NASDAQ:UCBI), Baozun Inc (NASDAQ:BZUN), PureCycle Technologies, Inc. (NASDAQ:PCT), Butterfly Network, Inc. (NYSE:BFLY), and Columbia Banking System Inc (NASDAQ:COLB). All of these stocks’ market caps are similar to MLHR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $225 million in MLHR’s case. Butterfly Network, Inc. (NYSE:BFLY) is the most popular stock in this table. On the other hand Baozun Inc (NASDAQ:BZUN) is the least popular one with only 8 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 overall hedge fund sentiment score for MLHR is 81.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately MLHR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MLHR were disappointed as the stock returned -16.7% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.