“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on The Hain Celestial Group, Inc. (NASDAQ:HAIN) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is The Hain Celestial Group, Inc. (NASDAQ:HAIN) going to take off soon? Investors who are in the know are in an optimistic mood. The number of long hedge fund bets increased by 4 recently. Our calculations also showed that HAIN isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the fresh hedge fund action surrounding The Hain Celestial Group, Inc. (NASDAQ:HAIN).
What have hedge funds been doing with The Hain Celestial Group, Inc. (NASDAQ:HAIN)?
At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 31% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HAIN over the last 16 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Engaged Capital was the largest shareholder of The Hain Celestial Group, Inc. (NASDAQ:HAIN), with a stake worth $461.4 million reported as of the end of March. Trailing Engaged Capital was Armistice Capital, which amassed a stake valued at $43.8 million. GAMCO Investors, Sessa Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers were breaking ground themselves. Sessa Capital, managed by John Petry, assembled the most valuable position in The Hain Celestial Group, Inc. (NASDAQ:HAIN). Sessa Capital had $16.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $7.1 million investment in the stock during the quarter. The other funds with brand new HAIN positions are D. E. Shaw’s D E Shaw, Noam Gottesman’s GLG Partners, and Philippe Laffont’s Coatue Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Hain Celestial Group, Inc. (NASDAQ:HAIN) but similarly valued. These stocks are Healthcare Services Group, Inc. (NASDAQ:HCSG), WESCO International, Inc. (NYSE:WCC), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), and United Community Banks Inc (NASDAQ:UCBI). This group of stocks’ market valuations are closest to HAIN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HCSG | 20 | 101308 | -1 |
| WCC | 18 | 473813 | -8 |
| LGND | 19 | 416379 | -4 |
| UCBI | 12 | 56454 | -3 |
| Average | 17.25 | 261989 | -4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $262 million. That figure was $545 million in HAIN’s case. Healthcare Services Group, Inc. (NASDAQ:HCSG) is the most popular stock in this table. On the other hand United Community Banks Inc (NASDAQ:UCBI) is the least popular one with only 12 bullish hedge fund positions. The Hain Celestial Group, Inc. (NASDAQ:HAIN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HAIN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HAIN investors were disappointed as the stock returned -1.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
