How do we determine whether Herman Miller, Inc. (NASDAQ:MLHR) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Herman Miller, Inc. (NASDAQ:MLHR) was in 26 hedge funds’ portfolios at the end of the third quarter of 2019. MLHR has seen an increase in hedge fund sentiment of late. There were 25 hedge funds in our database with MLHR holdings at the end of the previous quarter. Our calculations also showed that MLHR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action regarding Herman Miller, Inc. (NASDAQ:MLHR).
How have hedgies been trading Herman Miller, Inc. (NASDAQ:MLHR)?
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MLHR over the last 17 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Herman Miller, Inc. (NASDAQ:MLHR), which was worth $87.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $25.5 million worth of shares. GLG Partners, Renaissance Technologies, and Royce & Associates 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 Zebra Capital Management allocated the biggest weight to Herman Miller, Inc. (NASDAQ:MLHR), around 1.02% of its portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, designating 0.69 percent of its 13F equity portfolio to MLHR.
Consequently, key money managers were breaking ground themselves. Gotham Asset Management, managed by Joel Greenblatt, assembled the most outsized position in Herman Miller, Inc. (NASDAQ:MLHR). Gotham Asset Management had $2.1 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe’s Voleon Capital also made a $1.2 million investment in the stock during the quarter. The only other fund with a brand new MLHR position is Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s check out hedge fund activity in other stocks similar to Herman Miller, Inc. (NASDAQ:MLHR). We will take a look at EQT Corporation (NYSE:EQT), Gol Linhas Aereas Inteligentes SA (NYSE:GOL), Enphase Energy Inc (NASDAQ:ENPH), and Rattler Midstream LP (NASDAQ:RTLR). This group of stocks’ market values are closest to MLHR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQT | 35 | 442221 | 0 |
| GOL | 11 | 194286 | 3 |
| ENPH | 32 | 289899 | 12 |
| RTLR | 11 | 163347 | -9 |
| Average | 22.25 | 272438 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $210 million in MLHR’s case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Gol Linhas Aereas Inteligentes SA (NYSE:GOL) is the least popular one with only 11 bullish hedge fund positions. Herman Miller, Inc. (NASDAQ:MLHR) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MLHR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MLHR were disappointed as the stock returned 4.1% during the fourth quarter (through the end of November) 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.
