How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Horace Mann Educators Corporation (NYSE:HMN).
Horace Mann Educators Corporation (NYSE:HMN) was in 6 hedge funds’ portfolios at the end of September. Horace Mann Educators Corporation (NYSE:HMN) investors should pay attention to a decrease in support from the world’s most elite money managers lately. There were 7 hedge funds in our database with Horace Mann Educators Corporation (NYSE:HMN) holdings at the end of the previous quarter. The shares of the company had a similar movement, falling 8.69% throughout the quarter. For a better understanding of the hedge fund standings, we decided to cover hedge funds holding positions in the company at the end of September.
The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as FCB Financial Holdings Inc (NYSE:FCB), Nordic American Tanker Ltd (NYSE:NAT), and DBV Technologies SA – ADR (NASDAQ:DBVT) to gather more data points.
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According to most stock holders, hedge funds are seen as unimportant, outdated investment tools of the past. While there are over 8000 funds in operation at the moment, Our researchers look at the masters of this group, around 700 funds. These hedge fund managers direct the lion’s share of all hedge funds’ total asset base, and by tailing their top picks, Insider Monkey has identified many investment strategies that have historically outpaced the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Now, we’re going to take a look at the recent action encompassing Horace Mann Educators Corporation (NYSE:HMN).
What have hedge funds been doing with Horace Mann Educators Corporation (NYSE:HMN)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a decrease of 14% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Lee Munder’s Lee Munder Capital Group has the most valuable position in Horace Mann Educators Corporation (NYSE:HMN), worth close to $22.9 million, accounting for 0.5% of its total 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which holds a $13.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Renaissance Technologies, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Because Horace Mann Educators Corporation (NYSE:HMN) has witnessed a declination in interest from hedge fund managers, it’s safe to say that there were a few hedge funds that slashed their full holdings last quarter. At the top of the heap, Matthew Tewksbury’s Stevens Capital Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth an estimated $0.4 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also sold off its stock, about $0.4 million worth of shares. These moves are important to note, as total hedge fund interest was cut by 1 fund last quarter.
Let’s go over hedge fund activity in other stocks similar to Horace Mann Educators Corporation (NYSE:HMN). These stocks are FCB Financial Holdings Inc (NYSE:FCB), Nordic American Tanker Ltd (NYSE:NAT), DBV Technologies SA – ADR (NASDAQ:DBVT), and Coherent, Inc. (NASDAQ:COHR). This group of stocks’ market values match Horace Mann Educators Corporation (NYSE:HMN)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCB | 22 | 201174 | 7 |
| NAT | 18 | 80357 | 2 |
| DBVT | 17 | 343932 | 5 |
| COHR | 17 | 74097 | -5 |
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 $175 million. That figure was $52 million in Horace Mann Educators Corporation (NYSE:HMN)’s case. FCB Financial Holdings Inc (NYSE:FCB) is the most popular stock in this table. On the other hand, DBV Technologies SA – ADR (NASDAQ:DBVT) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks, Horace Mann Educators Corporation (NYSE:HMN) is even less popular than DBV Technologies SA – ADR (NASDAQ:DBVT). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.
