Does HCI Group, Inc. (NYSE:HCI) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
HCI Group, Inc. (NYSE:HCI) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of the first quarter of 2019. At the end of this article we will also compare HCI to other stocks including Capital City Bank Group, Inc. (NASDAQ:CCBG), Inovio Pharmaceuticals Inc (NASDAQ:INO), and Pulse Biosciences, Inc (NASDAQ:PLSE) to get a better sense of its popularity.
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 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.
Noam Gottesman, GLG Partners
We’re going to take a peek at the key hedge fund action regarding HCI Group, Inc. (NYSE:HCI).
Hedge fund activity in HCI Group, Inc. (NYSE:HCI)
At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HCI over the last 15 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.
When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in HCI Group, Inc. (NYSE:HCI), worth close to $7.4 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Renaissance Technologies, led by Jim Simons, holding a $4.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish consist of Noam Gottesman’s GLG Partners, Nick Niell’s Arrowgrass Capital Partners and John Overdeck and David Siegel’s Two Sigma Advisors.
Seeing as HCI Group, Inc. (NYSE:HCI) has experienced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of fund managers who were dropping their positions entirely by the end of the third quarter. Interestingly, Howard Marks’s Oaktree Capital Management dumped the biggest investment of all the hedgies monitored by Insider Monkey, worth close to $11 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $7.7 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to HCI Group, Inc. (NYSE:HCI). These stocks are Capital City Bank Group, Inc. (NASDAQ:CCBG), Inovio Pharmaceuticals Inc (NASDAQ:INO), Pulse Biosciences, Inc (NASDAQ:PLSE), and Capital Southwest Corporation (NASDAQ:CSWC). All of these stocks’ market caps are closest to HCI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCBG | 4 | 6142 | 2 |
| INO | 5 | 6343 | 0 |
| PLSE | 1 | 264 | -1 |
| CSWC | 7 | 45729 | -1 |
| Average | 4.25 | 14620 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $20 million in HCI’s case. Capital Southwest Corporation (NASDAQ:CSWC) is the most popular stock in this table. On the other hand Pulse Biosciences, Inc (NASDAQ:PLSE) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks HCI Group, Inc. (NYSE:HCI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately HCI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HCI were disappointed as the stock returned -3.6% during the same 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
