Is Heidrick & Struggles International, Inc. (NASDAQ:HSII) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Heidrick & Struggles International, Inc. (NASDAQ:HSII) shareholders have witnessed an increase in hedge fund sentiment in recent months. Our calculations also showed that HSII isn’t among the 30 most popular stocks among hedge funds.
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 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 32 percentage points since May 2014 through March 12, 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.
We’re going to analyze the new hedge fund action encompassing Heidrick & Struggles International, Inc. (NASDAQ:HSII).
What have hedge funds been doing with Heidrick & Struggles International, Inc. (NASDAQ:HSII)?
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HSII over the last 14 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.
The largest stake in Heidrick & Struggles International, Inc. (NASDAQ:HSII) was held by Renaissance Technologies, which reported holding $34.7 million worth of stock at the end of December. It was followed by Royce & Associates with a $20.5 million position. Other investors bullish on the company included GLG Partners, Marshall Wace LLP, and D E Shaw.
As one would reasonably expect, some big names have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in Heidrick & Struggles International, Inc. (NASDAQ:HSII). Marshall Wace LLP had $6.3 million invested in the company at the end of the quarter. Hoon Kim’s Quantinno Capital also initiated a $0.4 million position during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Heidrick & Struggles International, Inc. (NASDAQ:HSII) but similarly valued. We will take a look at Ra Pharmaceuticals, Inc. (NASDAQ:RARX), Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), Exela Technologies, Inc. (NASDAQ:XELA), and WideOpenWest, Inc. (NYSE:WOW). All of these stocks’ market caps are similar to HSII’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RARX | 17 | 159115 | 2 |
| RCKT | 14 | 176165 | -2 |
| XELA | 13 | 102031 | -1 |
| WOW | 13 | 35063 | 2 |
| Average | 14.25 | 118094 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $105 million in HSII’s case. Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is the most popular stock in this table. On the other hand Exela Technologies, Inc. (NASDAQ:XELA) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Heidrick & Struggles International, Inc. (NASDAQ:HSII) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on HSII as the stock returned 26.5% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
