Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Federated Hermes, Inc. (NYSE:FHI) to find out whether there were any major changes in hedge funds’ views.
Is Federated Hermes, Inc. (NYSE:FHI) worth your attention right now? Hedge funds were reducing their bets on the stock. The number of bullish hedge fund positions decreased by 2 lately. Federated Hermes, Inc. (NYSE:FHI) was in 23 hedge funds’ portfolios at the end of September. The all time high for this statistic is 33. Our calculations also showed that FHI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Chuck Royce of Royce & Associates
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a peek at the key hedge fund action regarding Federated Hermes, Inc. (NYSE:FHI).
Do Hedge Funds Think FHI Is A Good Stock To Buy Now?
At the end of September, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in FHI over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in Federated Hermes, Inc. (NYSE:FHI). Arrowstreet Capital has a $38.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $32.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism comprise Matthew Lindenbaum’s Basswood Capital, Cliff Asness’s AQR Capital Management and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Hourglass Capital allocated the biggest weight to Federated Hermes, Inc. (NYSE:FHI), around 2.9% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, earmarking 1.88 percent of its 13F equity portfolio to FHI.
Seeing as Federated Hermes, Inc. (NYSE:FHI) has witnessed falling interest from the smart money, we can see that there lies a certain “tier” of funds that slashed their positions entirely last quarter. Intriguingly, Ravi Chopra’s Azora Capital sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at about $12.1 million in stock, and Allon Hellmann’s Full18 Capital was right behind this move, as the fund said goodbye to about $3.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Federated Hermes, Inc. (NYSE:FHI). We will take a look at Equity Commonwealth (NYSE:EQC), EnerSys (NYSE:ENS), Spire Inc. (NYSE:SR), American States Water Co (NYSE:AWR), Manchester United PLC (NYSE:MANU), The Brink’s Company (NYSE:BCO), and Marathon Patent Group, Inc. (NASDAQ:MARA). All of these stocks’ market caps match FHI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQC | 20 | 173270 | -3 |
| ENS | 24 | 195830 | 5 |
| SR | 11 | 21853 | 2 |
| AWR | 16 | 37685 | 2 |
| MANU | 6 | 151055 | -6 |
| BCO | 17 | 281593 | 0 |
| MARA | 12 | 46753 | -7 |
| Average | 15.1 | 129720 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $224 million in FHI’s case. EnerSys (NYSE:ENS) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 6 bullish hedge fund positions. Federated Hermes, Inc. (NYSE:FHI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FHI is 71.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Hedge funds were also right about betting on FHI as the stock returned 11.2% since the end of Q3 (through 12/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Federated Hermes Inc. (NYSE:FHI)
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Disclosure: None. This article was originally published at Insider Monkey.
