The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Horace Mann Educators Corporation (NYSE:HMN) and determine whether the smart money was really smart about this stock.
Hedge fund interest in Horace Mann Educators Corporation (NYSE:HMN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare HMN to other stocks including Tenet Healthcare Corp (NYSE:THC), American Assets Trust, Inc (NYSE:AAT), and SAGE Therapeutics Inc (NASDAQ:SAGE) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Rogers of Ariel Investments
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the key hedge fund action regarding Horace Mann Educators Corporation (NYSE:HMN).
How have hedgies been trading Horace Mann Educators Corporation (NYSE:HMN)?
At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HMN over the last 18 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.
The largest stake in Horace Mann Educators Corporation (NYSE:HMN) was held by Ariel Investments, which reported holding $9.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $4.7 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to Horace Mann Educators Corporation (NYSE:HMN), around 0.16% of its 13F portfolio. Interval Partners is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to HMN.
Since Horace Mann Educators Corporation (NYSE:HMN) has witnessed a decline in interest from the smart money, it’s safe to say that there lies a certain “tier” of hedgies that elected to cut their full holdings heading into Q4. At the top of the heap, Michael Gelband’s ExodusPoint Capital dropped the largest stake of all the hedgies tracked by Insider Monkey, totaling about $0.5 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also said goodbye to its stock, about $0.2 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Horace Mann Educators Corporation (NYSE:HMN) but similarly valued. We will take a look at Tenet Healthcare Corp (NYSE:THC), American Assets Trust, Inc (NYSE:AAT), SAGE Therapeutics Inc (NASDAQ:SAGE), and PQ Group Holdings Inc. (NYSE:PQG). All of these stocks’ market caps are similar to HMN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THC | 35 | 490303 | 1 |
| AAT | 15 | 33326 | 0 |
| SAGE | 30 | 257910 | -5 |
| PQG | 7 | 36427 | 3 |
| Average | 21.75 | 204492 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $22 million in HMN’s case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 7 bullish hedge fund positions. Horace Mann Educators Corporation (NYSE:HMN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately HMN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HMN investors were disappointed as the stock returned 1.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Horace Mann Educators Corp (NYSE:HMN)
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Disclosure: None. This article was originally published at Insider Monkey.
