It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year (through May 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like HB Fuller Co (NYSE:FUL).
Is HB Fuller Co (NYSE:FUL) an excellent investment today? Prominent investors are becoming more confident. The number of bullish hedge fund bets moved up by 4 lately. Our calculations also showed that ful isn’t among the 30 most popular stocks among hedge funds. FUL was in 18 hedge funds’ portfolios at the end of March. There were 14 hedge funds in our database with FUL holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a look at the recent hedge fund action encompassing HB Fuller Co (NYSE:FUL).
What have hedge funds been doing with HB Fuller Co (NYSE:FUL)?
Heading into the second quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in FUL a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, P2 Capital Partners was the largest shareholder of HB Fuller Co (NYSE:FUL), with a stake worth $56.9 million reported as of the end of March. Trailing P2 Capital Partners was GAMCO Investors, which amassed a stake valued at $28 million. Millennium Management, Albar Capital, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key money managers were breaking ground themselves. Albar Capital, managed by Javier Velazquez, created the largest position in HB Fuller Co (NYSE:FUL). Albar Capital had $20.5 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $7.8 million investment in the stock during the quarter. The following funds were also among the new FUL investors: Peter Muller’s PDT Partners, Joseph Mathias’s Concourse Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to HB Fuller Co (NYSE:FUL). These stocks are Cimpress NV (NASDAQ:CMPR), Xenia Hotels & Resorts Inc (NYSE:XHR), Focus Financial Partners Inc. (NASDAQ:FOCS), and Everbridge, Inc. (NASDAQ:EVBG). This group of stocks’ market caps are closest to FUL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMPR | 11 | 428204 | -7 |
| XHR | 9 | 45662 | -4 |
| FOCS | 5 | 179875 | -3 |
| EVBG | 30 | 421160 | 8 |
| Average | 13.75 | 268725 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $269 million. That figure was $190 million in FUL’s case. Everbridge, Inc. (NASDAQ:EVBG) is the most popular stock in this table. On the other hand Focus Financial Partners Inc. (NASDAQ:FOCS) is the least popular one with only 5 bullish hedge fund positions. HB Fuller Co (NYSE:FUL) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately FUL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FUL were disappointed as the stock returned -16% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
