Hedge Funds Are Piling Into Hurco Companies, Inc. (HURC)

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Hurco Companies, Inc. (NASDAQ:HURC) to find out whether there were any major changes in hedge funds’ views.

Is Hurco Companies, Inc. (NASDAQ:HURC) a safe stock to buy now? Prominent investors were getting more bullish. The number of bullish hedge fund bets inched up by 3 in recent months. Hurco Companies, Inc. (NASDAQ:HURC) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HURC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 7 hedge funds in our database with HURC positions at the end of the first quarter.

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 S&P 500 ETFs by 79 percentage points since March 2017 (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.

Chuck Royce of Royce & Associates

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 let’s check out the new hedge fund action regarding Hurco Companies, Inc. (NASDAQ:HURC).

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

At the end of June, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 43% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HURC over the last 24 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Royce & Associates held the most valuable stake in Hurco Companies, Inc. (NASDAQ:HURC), which was worth $32.8 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $5.1 million worth of shares. Value Holdings LP, Millennium Management, and Invenomic Capital Management 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 Value Holdings LP allocated the biggest weight to Hurco Companies, Inc. (NASDAQ:HURC), around 0.68% of its 13F portfolio. Nierenberg Investment Management is also relatively very bullish on the stock, designating 0.55 percent of its 13F equity portfolio to HURC.

As one would reasonably expect, key hedge funds have jumped into Hurco Companies, Inc. (NASDAQ:HURC) headfirst. Invenomic Capital Management, managed by Ali Motamed, established the most outsized position in Hurco Companies, Inc. (NASDAQ:HURC). Invenomic Capital Management had $1.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.5 million position during the quarter. The only other fund with a new position in the stock is Matthew Stadelman’s Diamond Hill Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hurco Companies, Inc. (NASDAQ:HURC) but similarly valued. We will take a look at KVH Industries, Inc. (NASDAQ:KVHI), BCB Bancorp, Inc. (NASDAQ:BCBP), Future FinTech Group Inc. (NASDAQ:FTFT), SC Health Corporation (NYSE:SCPE), Unity Bancorp, Inc. (NASDAQ:UNTY), Cedar Realty Trust Inc (NYSE:CDR), and ASLAN Pharmaceuticals Limited (NASDAQ:ASLN). All of these stocks’ market caps are closest to HURC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $46 million in HURC’s case. ASLAN Pharmaceuticals Limited (NASDAQ:ASLN) is the most popular stock in this table. On the other hand Future FinTech Group Inc. (NASDAQ:FTFT) is the least popular one with only 6 bullish hedge fund positions. Hurco Companies, Inc. (NASDAQ:HURC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HURC is 58. 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 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately HURC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on HURC were disappointed as the stock returned -6% since the end of June (through 9/27) 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.