Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Hanger, Inc. (NYSE:HNGR) was in 22 hedge funds’ portfolios at the end of the first quarter of 2019. HNGR investors should be aware of an increase in hedge fund sentiment of late. There were 18 hedge funds in our database with HNGR holdings at the end of the previous quarter. Our calculations also showed that hngr isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a look at the recent hedge fund action surrounding Hanger, Inc. (NYSE:HNGR).
Hedge fund activity in Hanger, Inc. (NYSE:HNGR)
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HNGR over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Courage Capital was the largest shareholder of Hanger, Inc. (NYSE:HNGR), with a stake worth $22.7 million reported as of the end of March. Trailing Courage Capital was SCW Capital Management, which amassed a stake valued at $21.6 million. Cannell Capital, Prosight Capital, and Tudor Investment Corp were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key money managers have been driving this bullishness. Ancora Advisors, managed by Frederick DiSanto, established the most outsized position in Hanger, Inc. (NYSE:HNGR). Ancora Advisors had $8.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $2.4 million investment in the stock during the quarter. The following funds were also among the new HNGR investors: Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw, and Joel Greenblatt’s Gotham Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hanger, Inc. (NYSE:HNGR) but similarly valued. We will take a look at Precision Drilling Corp (NYSE:PDS), Modine Manufacturing Company (NYSE:MOD), Banc of California, Inc. (NYSE:BANC), and Weatherford International plc (NYSE:WFT). This group of stocks’ market valuations match HNGR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PDS | 16 | 36738 | 2 |
| MOD | 17 | 69889 | 0 |
| BANC | 15 | 92220 | -2 |
| WFT | 15 | 38444 | -7 |
| Average | 15.75 | 59323 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $155 million in HNGR’s case. Modine Manufacturing Company (NYSE:MOD) is the most popular stock in this table. On the other hand Banc of California, Inc. (NYSE:BANC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Hanger, Inc. (NYSE:HNGR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on HNGR, though not to the same extent, as the stock returned -0.3% during the same period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
