We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Hawaiian Electric Industries, Inc. (NYSE:HE) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Hawaiian Electric Industries, Inc. (NYSE:HE) ready to rally soon? Money managers are becoming hopeful. The number of long hedge fund bets improved by 3 recently. Our calculations also showed that HE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Ubben of ValueAct Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the new hedge fund action encompassing Hawaiian Electric Industries, Inc. (NYSE:HE).
What have hedge funds been doing with Hawaiian Electric Industries, Inc. (NYSE:HE)?
Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HE over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Hawaiian Electric Industries, Inc. (NYSE:HE) was held by ValueAct Capital, which reported holding $95.3 million worth of stock at the end of September. It was followed by AQR Capital Management with a $29.4 million position. Other investors bullish on the company included Winton Capital Management, GLG Partners, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Signition LP allocated the biggest weight to Hawaiian Electric Industries, Inc. (NYSE:HE), around 1.28% of its 13F portfolio. ValueAct Capital is also relatively very bullish on the stock, setting aside 0.96 percent of its 13F equity portfolio to HE.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Hawaiian Electric Industries, Inc. (NYSE:HE) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in Hawaiian Electric Industries, Inc. (NYSE:HE). Citadel Investment Group had $1.8 million invested in the company at the end of the quarter. Mika Toikka’s AlphaCrest Capital Management also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, George Zweig, Shane Haas and Ravi Chander’s Signition LP, and Matthew L Pinz’s Pinz Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hawaiian Electric Industries, Inc. (NYSE:HE) but similarly valued. We will take a look at DCP Midstream LP (NYSE:DCP), RealPage, Inc. (NASDAQ:RP), Manhattan Associates, Inc. (NASDAQ:MANH), and World Wrestling Entertainment, Inc. (NYSE:WWE). All of these stocks’ market caps are similar to HE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DCP | 6 | 18020 | 2 |
| RP | 36 | 603605 | 0 |
| MANH | 24 | 455484 | -1 |
| WWE | 30 | 599403 | -7 |
| Average | 24 | 419128 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $419 million. That figure was $176 million in HE’s case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 6 bullish hedge fund positions. Hawaiian Electric Industries, Inc. (NYSE:HE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on HE, though not to the same extent, as the stock returned -18.2% during the same time period and outperformed the market.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
