At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Hexcel Corporation (NYSE:HXL) makes for a good investment right now.
Is Hexcel Corporation (NYSE:HXL) worth your attention right now? Prominent investors are becoming hopeful. The number of long hedge fund bets advanced by 9 in recent months. Our calculations also showed that HXL isn’t among the 30 most popular stocks among hedge funds.
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 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to view the key hedge fund action encompassing Hexcel Corporation (NYSE:HXL).
What does the smart money think about Hexcel Corporation (NYSE:HXL)?
Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 64% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in HXL over the last 13 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Hexcel Corporation (NYSE:HXL) was held by Joho Capital, which reported holding $55.4 million worth of stock at the end of September. It was followed by Millennium Management with a $49.5 million position. Other investors bullish on the company included D E Shaw, Balyasny Asset Management, and Marshall Wace LLP.
As aggregate interest increased, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in Hexcel Corporation (NYSE:HXL). Marshall Wace LLP had $14 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $6.7 million position during the quarter. The other funds with brand new HXL positions are Joe DiMenna’s ZWEIG DIMENNA PARTNERS, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and Joel Greenblatt’s Gotham Asset Management.
Let’s go over hedge fund activity in other stocks similar to Hexcel Corporation (NYSE:HXL). These stocks are Six Flags Entertainment Corp (NYSE:SIX), Crane Co. (NYSE:CR), Foot Locker, Inc. (NYSE:FL), and HubSpot Inc (NYSE:HUBS). This group of stocks’ market caps are closest to HXL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIX | 25 | 733870 | 9 |
| CR | 19 | 348653 | 0 |
| FL | 26 | 465132 | -4 |
| HUBS | 21 | 440876 | -1 |
| Average | 22.75 | 497133 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $497 million. That figure was $223 million in HXL’s case. Foot Locker, Inc. (NYSE:FL) is the most popular stock in this table. On the other hand Crane Co. (NYSE:CR) is the least popular one with only 19 bullish hedge fund positions. Hexcel Corporation (NYSE:HXL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FL might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
