In this article we will take a look at whether hedge funds think Herbalife Nutrition Ltd. (NYSE:HLF) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Herbalife Nutrition Ltd. (NYSE:HLF) was in 31 hedge funds’ portfolios at the end of March. HLF investors should pay attention to a decrease in support from the world’s most elite money managers lately. There were 32 hedge funds in our database with HLF positions at the end of the previous quarter. Our calculations also showed that HLF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the key hedge fund action encompassing Herbalife Nutrition Ltd. (NYSE:HLF).
Hedge fund activity in Herbalife Nutrition Ltd. (NYSE:HLF)
Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HLF 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.
Among these funds, Icahn Capital LP held the most valuable stake in Herbalife Nutrition Ltd. (NYSE:HLF), which was worth $1027.2 million at the end of the third quarter. On the second spot was Deccan Value Advisors which amassed $367.2 million worth of shares. Renaissance Technologies, Route One Investment Company, and Bronte Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Deccan Value Advisors allocated the biggest weight to Herbalife Nutrition Ltd. (NYSE:HLF), around 31.54% of its 13F portfolio. Bronte Capital is also relatively very bullish on the stock, earmarking 11.05 percent of its 13F equity portfolio to HLF.
Seeing as Herbalife Nutrition Ltd. (NYSE:HLF) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers that decided to sell off their entire stakes by the end of the first quarter. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $18.1 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Herbalife Nutrition Ltd. (NYSE:HLF) but similarly valued. We will take a look at IAA, Inc. (NYSE:IAA), Enphase Energy Inc (NASDAQ:ENPH), CDK Global Inc (NASDAQ:CDK), and ITT Inc. (NYSE:ITT). All of these stocks’ market caps match HLF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IAA | 39 | 804594 | 2 |
| ENPH | 35 | 370199 | -4 |
| CDK | 24 | 180742 | -1 |
| ITT | 28 | 373059 | 0 |
| Average | 31.5 | 432149 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $432 million. That figure was $2056 million in HLF’s case. IAA, Inc. (NYSE:IAA) is the most popular stock in this table. On the other hand CDK Global Inc (NASDAQ:CDK) is the least popular one with only 24 bullish hedge fund positions. Herbalife Nutrition Ltd. (NYSE:HLF) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on HLF as the stock returned 50.3% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
