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 (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Herbalife Nutrition Ltd. (NYSE:HLF).
Is Herbalife Nutrition Ltd. (NYSE:HLF) worth your attention right now? Prominent investors are in an optimistic mood. The number of long hedge fund positions advanced by 9 lately. Our calculations also showed that HLF 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). HLF was in 32 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 23 hedge funds in our database with HLF positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Carl Icahn of Icahn 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. Now let’s go over the key hedge fund action surrounding Herbalife Nutrition Ltd. (NYSE:HLF).
What have hedge funds been doing with Herbalife Nutrition Ltd. (NYSE:HLF)?
Heading into the first quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 39% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in HLF over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Icahn Capital LP, managed by Carl Icahn, holds the biggest position in Herbalife Nutrition Ltd. (NYSE:HLF). Icahn Capital LP has a $1.6793 billion position in the stock, comprising 6.4% of its 13F portfolio. On Icahn Capital LP’s heels is Deccan Value Advisors, managed by Vinit Bodas, which holds a $497.2 million position; the fund has 40.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Renaissance Technologies, Lone Pine Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Deccan Value Advisors allocated the biggest weight to Herbalife Nutrition Ltd. (NYSE:HLF), around 40.45% of its 13F portfolio. Bronte Capital is also relatively very bullish on the stock, designating 14.14 percent of its 13F equity portfolio to HLF.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Herbalife Nutrition Ltd. (NYSE:HLF) headfirst. Candlestick Capital Management, managed by Jack Woodruff, created the most valuable position in Herbalife Nutrition Ltd. (NYSE:HLF). Candlestick Capital Management had $32.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $18.1 million position during the quarter. The other funds with brand new HLF positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Donald Sussman’s Paloma Partners, and Jonathan Soros’s JS Capital.
Let’s also examine hedge fund activity in other stocks similar to Herbalife Nutrition Ltd. (NYSE:HLF). We will take a look at Starwood Property Trust, Inc. (NYSE:STWD), Anaplan, Inc. (NYSE:PLAN), FLIR Systems, Inc. (NASDAQ:FLIR), and Momo Inc (NASDAQ:MOMO). This group of stocks’ market valuations match HLF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STWD | 21 | 168906 | 1 |
| PLAN | 57 | 2187728 | 13 |
| FLIR | 32 | 202619 | 7 |
| MOMO | 38 | 917767 | 11 |
| Average | 37 | 869255 | 8 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $869 million. That figure was $3312 million in HLF’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand Starwood Property Trust, Inc. (NYSE:STWD) is the least popular one with only 21 bullish hedge fund positions. Herbalife Nutrition Ltd. (NYSE:HLF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately HLF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HLF investors were disappointed as the stock returned -46.4% during the same time period 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 most of these stocks already outperformed the market in Q1.
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.
