It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like HB Fuller Company (NYSE:FUL).
HB Fuller Company (NYSE:FUL) was in 14 hedge funds’ portfolios at the end of September. FUL investors should be aware of an increase in activity from the world’s largest hedge funds recently. There were 12 hedge funds in our database with FUL positions at the end of the previous quarter. Our calculations also showed that FUL 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.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
Jonathan Barrett of Luminus Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the key hedge fund action surrounding HB Fuller Company (NYSE:FUL).
How have hedgies been trading HB Fuller Company (NYSE:FUL)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FUL over the last 17 quarters. So, let’s see 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, Claus Moller’s P2 Capital Partners has the most valuable position in HB Fuller Company (NYSE:FUL), worth close to $82.9 million, corresponding to 5.6% of its total 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, led by Mario Gabelli, holding a $25.9 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions contain Jonathan Barrett and Paul Segal’s Luminus Management, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position P2 Capital Partners allocated the biggest weight to HB Fuller Company (NYSE:FUL), around 5.6% of its 13F portfolio. Concourse Capital Management is also relatively very bullish on the stock, setting aside 2.16 percent of its 13F equity portfolio to FUL.
As aggregate interest increased, specific money managers have jumped into HB Fuller Company (NYSE:FUL) headfirst. Luminus Management, managed by Jonathan Barrett and Paul Segal, assembled the largest position in HB Fuller Company (NYSE:FUL). Luminus Management had $10 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $3.5 million investment in the stock during the quarter. The following funds were also among the new FUL investors: Joseph Mathias’s Concourse Capital Management, Paul Marshall and Ian Wace’s Marshall Wace, and Ken Griffin’s Citadel Investment Group.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as HB Fuller Company (NYSE:FUL) but similarly valued. We will take a look at The Simply Good Foods Company (NASDAQ:SMPL), Nu Skin Enterprises, Inc. (NYSE:NUS), Pluralsight, Inc. (NASDAQ:PS), and Jack in the Box Inc. (NASDAQ:JACK). This group of stocks’ market values match FUL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMPL | 21 | 219922 | -2 |
| NUS | 20 | 244787 | 0 |
| PS | 20 | 140370 | 0 |
| JACK | 29 | 478938 | -4 |
| Average | 22.5 | 271004 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $147 million in FUL’s case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand Nu Skin Enterprises, Inc. (NYSE:NUS) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks HB Fuller Company (NYSE:FUL) is even less popular than NUS. 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. A small number of hedge funds were also right about betting on FUL, though not to the same extent, as the stock returned 7.5% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
