Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
One stock that registered an increase in popularity during the third quarter is Heritage Insurance Holdings Inc (NYSE:HRTG). Overall, the number of funds from our database long the stock inched up by one. At the end of this article we will also compare HRTG to other stocks including Gladstone Commercial Corporation (NASDAQ:GOOD), Mercantile Bank Corp. (NASDAQ:MBWM), and Western Asset Mortgage Capital Corp (NYSE:WMC) to get a better sense of its popularity.
Follow Heritage Insurance Holdings Inc. (NYSE:HRTG)
Follow Heritage Insurance Holdings Inc. (NYSE:HRTG)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, we’re going to take a gander at the recent action regarding Heritage Insurance Holdings Inc (NYSE:HRTG).
What have hedge funds been doing with Heritage Insurance Holdings Inc (NYSE:HRTG)?
Heading into the fourth quarter of 2016, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, up by 7% over the quarter. The graph below displays the number of hedge funds with bullish position in HRTG over the last five quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Brian Ashford-Russell and Tim Woolley’s Polar Capital has the number one position in Heritage Insurance Holdings Inc (NYSE:HRTG), worth close to $10.4 million. Coming in second is Cliff Asness’ AQR Capital Management holding a $6.6 million position. Remaining peers with similar optimism contain Jim Simons’ Renaissance Technologies and Robert B. Gillam’s McKinley Capital 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.
Consequently, specific money managers were breaking ground themselves. Chuck Royce’s Royce & Associates created the most outsized position in Heritage Insurance Holdings Inc (NYSE:HRTG). Royce & Associates had $4.2 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $2.6 million position during the quarter. The only other fund with a new position in the stock is Ken Griffin’s Citadel Investment Group.
Let’s now review hedge fund activity in other stocks similar to Heritage Insurance Holdings Inc (NYSE:HRTG). We will take a look at Gladstone Commercial Corporation (NASDAQ:GOOD), Mercantile Bank Corp. (NASDAQ:MBWM), Western Asset Mortgage Capital Corp (NYSE:WMC), and Monarch Casino & Resort, Inc. (NASDAQ:MCRI). This group of stocks’ market caps resemble HRTG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GOOD | 8 | 33797 | 1 |
| MBWM | 6 | 23502 | 0 |
| WMC | 6 | 6129 | 2 |
| MCRI | 10 | 46957 | -4 |
As you can see these stocks had an average of seven investors with bullish positions and the average amount invested in these stocks was $28 million, versus $38 million in HRTG’s case. Monarch Casino & Resort, Inc. (NASDAQ:MCRI) is the most popular stock in this table. On the other hand Mercantile Bank Corp. (NASDAQ:MBWM) is the least popular one with only six bullish hedge fund positions. Compared to these stocks Heritage Insurance Holdings Inc (NYSE:HRTG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
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