HSN, Inc. (HSNI): Hedge Fund Ownership Going Nowhere

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Hedge fund interest in HSN, Inc. (NASDAQ:HSNI) shares was flat during the third quarter. This is usually a negative indicator. 13 hedge funds that we track owned the stock on September 30, same as on June 30. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Virtu Financial Inc (NASDAQ:VIRT), Colony Financial Inc (NYSE:CLNY), and Chemtura Corp (NYSE:CHMT) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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How are hedge funds trading HSN, Inc. (NASDAQ:HSNI)?

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HSNI over the last 5 quarters, which had remained relatively stable throughout that time. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, AQR Capital Management, led by Cliff Asness, holds the number one position in HSN, Inc. (NASDAQ:HSNI). AQR Capital Management has an $8.7 million position in the stock. On AQR Capital Management’s heels is Citadel Investment Group, led by Ken Griffin, which holds a $7.5 million position. Remaining professional money managers with similar optimism consist of Larry Petrella and Michael Siminerio’s PineView Asset Management, Jim Simons’ Renaissance Technologies, and Joel Greenblatt’s Gotham Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dumped their positions entirely. It’s worth mentioning that Matthew Iorio’s White Elm Capital dumped the biggest investment of all the hedgies studied by Insider Monkey, valued at about $33.5 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dropped about $15.6 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as HSN, Inc. (NASDAQ:HSNI) but similarly valued. We will take a look at Virtu Financial Inc (NASDAQ:VIRT), Colony Financial Inc (NYSE:CLNY), Chemtura Corp (NYSE:CHMT), and CBL & Associates Properties, Inc. (NYSE:CBL). This group of stocks’ market valuations are similar to HSNI’s market valuation.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $196 million. That figure was $53 million in HSNI’s case. Colony Financial Inc (NYSE:CLNY) is the most popular stock in this table. On the other hand CBL & Associates Properties, Inc. (NYSE:CBL) is the least popular one with only 11 bullish hedge fund positions. HSN, Inc. (NASDAQ:HSNI) 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. In this regard CLNY might be a better candidate to consider taking a long position in.

Disclosure: None