We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Harmonic Inc (NASDAQ:HLIT).
Hedge fund interest in Harmonic Inc (NASDAQ:HLIT) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Simulations Plus, Inc. (NASDAQ:SLP), Overstock.com, Inc. (NASDAQ:OSTK), and GlycoMimetics, Inc. (NASDAQ:GLYC) to gather more data points. Our calculations also showed that HLIT 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.
In the eyes of most shareholders, hedge funds are assumed to be slow, old financial vehicles of the past. While there are over 8000 funds with their doors open today, Our researchers choose to focus on the crème de la crème of this group, approximately 750 funds. These money managers orchestrate bulk of all hedge funds’ total capital, and by paying attention to their best equity investments, Insider Monkey has uncovered many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
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 look at the recent hedge fund action surrounding Harmonic Inc (NASDAQ:HLIT).
How are hedge funds trading Harmonic Inc (NASDAQ:HLIT)?
Heading into the third quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HLIT over the last 16 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Scopia Capital was the largest shareholder of Harmonic Inc (NASDAQ:HLIT), with a stake worth $33.8 million reported as of the end of March. Trailing Scopia Capital was Divisar Capital, which amassed a stake valued at $16.5 million. Raging Capital Management, Arrowstreet Capital, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Harmonic Inc (NASDAQ:HLIT) has faced a decline in interest from the smart money, it’s safe to say that there was a specific group of funds that slashed their full holdings by the end of the second quarter. It’s worth mentioning that Will Graves’s Boardman Bay Capital Management sold off the biggest position of the 750 funds monitored by Insider Monkey, totaling about $0.5 million in stock, and Brian C. Freckmann’s Lyon Street Capital was right behind this move, as the fund sold off about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Harmonic Inc (NASDAQ:HLIT). We will take a look at Simulations Plus, Inc. (NASDAQ:SLP), Overstock.com, Inc. (NASDAQ:OSTK), GlycoMimetics, Inc. (NASDAQ:GLYC), and The Bancorp, Inc. (NASDAQ:TBBK). This group of stocks’ market caps are similar to HLIT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SLP | 9 | 32263 | 3 |
| OSTK | 9 | 13457 | -4 |
| GLYC | 9 | 46257 | 1 |
| TBBK | 17 | 80825 | 1 |
| Average | 11 | 43201 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $80 million in HLIT’s case. The Bancorp, Inc. (NASDAQ:TBBK) is the most popular stock in this table. On the other hand Simulations Plus, Inc. (NASDAQ:SLP) is the least popular one with only 9 bullish hedge fund positions. Harmonic Inc (NASDAQ:HLIT) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on HLIT as the stock returned 18.6% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
