We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Horace Mann Educators Corporation (NYSE:HMN), and what that likely means for the prospects of the company and its stock.
Horace Mann Educators Corporation (NYSE:HMN) investors should pay attention to a decrease in hedge fund interest in recent months. There were 11 funds in our database with HMN positions at the end of the third quarter. 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 Park National Corporation (NYSEAMEX:PRK), Crestwood Equity Partners LP (NYSE:CEQP), and Infoblox Inc (NYSE:BLOX) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Keeping this in mind, we’re going to review the new action surrounding Horace Mann Educators Corporation (NYSE:HMN).
How are hedge funds trading Horace Mann Educators Corporation (NYSE:HMN)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of down by 15% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in HMN over the last five quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, John W. Rogers’s Ariel Investments has the number one position in Horace Mann Educators Corporation (NYSE:HMN), worth close to $13.4 million, comprising 0.2% of its total 13F portfolio. On Ariel Investments’s heels is AQR Capital Management, led by Cliff Asness, holding a $6.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish contain Ken Griffin’s Citadel Investment Group, Millennium Management, one of the 10 largest hedge funds in the world and Jim Simons’ Renaissance Technologies. 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.
Judging by the fact that Horace Mann Educators Corporation (NYSE:HMN) has encountered falling interest from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds who sold off their positions entirely heading into Q4. At the top of the heap, Matthew Tewksbury’s Stevens Capital Management cut the largest stake of all the investors tracked by Insider Monkey, totaling close to $0.4 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund sold off about $0.4 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks similar to Horace Mann Educators Corporation (NYSE:HMN). These stocks are Park National Corporation (NYSEAMEX:PRK), Crestwood Equity Partners LP (NYSE:CEQP), Infoblox Inc (NYSE:BLOX), and Noah Holdings Limited (ADR) (NYSE:NOAH). All of these stocks’ market caps are similar to HMN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRK | 4 | 7663 | 4 |
| CEQP | 7 | 19624 | -2 |
| BLOX | 29 | 437605 | 4 |
| NOAH | 8 | 52556 | 2 |
As you can see these stocks had an average of 12 funds with bullish positions and the average amount invested in these stocks was $129 million, versus $29 million in HMN’s case. Infoblox Inc (NYSE:BLOX) is the most popular stock in this table. On the other hand Park National Corporation (NYSEAMEX:PRK) is the least popular one with only four funds holding shares. Horace Mann Educators Corporation (NYSE:HMN) 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 BLOX might be a better candidate to consider taking a long position in.
Disclosure: none
