The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Warrior Met Coal, Inc. (NYSE:HCC) and find out how it is affected by hedge funds’ moves.
Warrior Met Coal, Inc. (NYSE:HCC) was in 33 hedge funds’ portfolios at the end of December. HCC investors should pay attention to a decrease in support from the world’s most elite money managers recently. There were 35 hedge funds in our database with HCC holdings at the end of the previous quarter. Our calculations also showed that HCC isn’t among the 30 most popular stocks among hedge funds.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to go over the recent hedge fund action regarding Warrior Met Coal, Inc. (NYSE:HCC).
What does the smart money think about Warrior Met Coal, Inc. (NYSE:HCC)?
At Q4’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in HCC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Third Avenue Management was the largest shareholder of Warrior Met Coal, Inc. (NYSE:HCC), with a stake worth $63.2 million reported as of the end of December. Trailing Third Avenue Management was Millennium Management, which amassed a stake valued at $49.2 million. Luminus Management, Platinum Asset Management, and Anchor Bolt Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Warrior Met Coal, Inc. (NYSE:HCC) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of funds who sold off their entire stakes in the third quarter. It’s worth mentioning that Benjamin A. Smith’s Laurion Capital Management dumped the largest position of all the hedgies tracked by Insider Monkey, worth an estimated $21.6 million in stock. Mark Kingdon’s fund, Kingdon Capital, also cut its stock, about $3.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Warrior Met Coal, Inc. (NYSE:HCC) but similarly valued. We will take a look at The Liberty Braves Group (NASDAQ:BATRA), Tri Continental Corporation (NYSE:TY), Hub Group Inc (NASDAQ:HUBG), and AMC Entertainment Holdings Inc (NYSE:AMC). This group of stocks’ market valuations are closest to HCC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BATRA | 10 | 64390 | 2 |
| TY | 4 | 5516 | 2 |
| HUBG | 21 | 241245 | 0 |
| AMC | 21 | 89015 | 0 |
| Average | 14 | 100042 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $450 million in HCC’s case. Hub Group Inc (NASDAQ:HUBG) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Warrior Met Coal, Inc. (NYSE:HCC) 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 HCC as the stock returned 27% 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.
