“The end to the U.S. Government shutdown, reports of progress on China-U.S. trade talks, and the Federal Reserve’s confirmation that it did not plan further interest rate hikes in 2019 allayed investor fears and drove U.S. markets substantially higher in the first quarter of the year. Global markets followed suit pretty much across the board delivering what some market participants described as a “V-shaped” recovery,” This is how Evermore Global Value summarized the first quarter in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Hertz Global Holdings, Inc. (NYSE:HTZ) shareholders have witnessed an increase in enthusiasm from smart money recently. Our calculations also showed that HTZ isn’t among the 30 most popular stocks among hedge funds.
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 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 view the recent hedge fund action surrounding Hertz Global Holdings, Inc. (NYSE:HTZ).
Hedge fund activity in Hertz Global Holdings, Inc. (NYSE:HTZ)
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HTZ over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Icahn Capital LP was the largest shareholder of Hertz Global Holdings, Inc. (NYSE:HTZ), with a stake worth $421.5 million reported as of the end of March. Trailing Icahn Capital LP was Renaissance Technologies, which amassed a stake valued at $109.3 million. PAR Capital Management, GAMCO Investors, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key money managers have jumped into Hertz Global Holdings, Inc. (NYSE:HTZ) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in Hertz Global Holdings, Inc. (NYSE:HTZ). Arrowstreet Capital had $21.9 million invested in the company at the end of the quarter. Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management also made a $6.9 million investment in the stock during the quarter. The following funds were also among the new HTZ investors: Benjamin A. Smith’s Laurion Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Joel Greenblatt’s Gotham Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hertz Global Holdings, Inc. (NYSE:HTZ) but similarly valued. These stocks are Endava plc (NYSE:DAVA), Kinsale Capital Group, Inc. (NASDAQ:KNSL), Installed Building Products Inc (NYSE:IBP), and Tootsie Roll Industries, Inc. (NYSE:TR). All of these stocks’ market caps are similar to HTZ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DAVA | 6 | 16966 | 0 |
| KNSL | 9 | 18995 | -3 |
| IBP | 13 | 187591 | 5 |
| TR | 16 | 94425 | 5 |
| Average | 11 | 79494 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $944 million in HTZ’s case. Tootsie Roll Industries, Inc. (NYSE:TR) is the most popular stock in this table. On the other hand Endava plc (NYSE:DAVA) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Hertz Global Holdings, Inc. (NYSE:HTZ) is more popular among hedge funds. 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 HTZ wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HTZ 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
