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 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-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’ consensus 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 Horizon Global Corp (NYSE:HZN).
Is Horizon Global Corp (NYSE:HZN) the right investment to pursue these days? Investors who are in the know are taking a bullish view. The number of long hedge fund positions went up by 1 in recent months. Our calculations also showed that HZN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are plenty of methods stock market investors have at their disposal to grade stocks. A couple of the less utilized methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can trounce the broader indices by a very impressive amount (see the details here).
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to check out the fresh hedge fund action regarding Horizon Global Corp (NYSE:HZN).
How are hedge funds trading Horizon Global Corp (NYSE:HZN)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HZN over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Horizon Global Corp (NYSE:HZN). Royce & Associates has a $6.9 million position in the stock, comprising 0.1% of its 13F portfolio. On Royce & Associates’s heels is D E Shaw, led by David E. Shaw, holding a $1.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Christopher Pucillo’s Solus Alternative Asset Management, Renaissance Technologies and . In terms of the portfolio weights assigned to each position Solus Alternative Asset Management allocated the biggest weight to Horizon Global Corp (NYSE:HZN), around 0.09% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to HZN.
As one would reasonably expect, some big names have been driving this bullishness. Solus Alternative Asset Management, managed by Christopher Pucillo, initiated the biggest position in Horizon Global Corp (NYSE:HZN). Solus Alternative Asset Management had $0.3 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Horizon Global Corp (NYSE:HZN). These stocks are Lakeland Industries, Inc. (NASDAQ:LAKE), CPI Aerostructures, Inc. (NYSE:CVU), Aqua Metals, Inc. (NASDAQ:AQMS), and Fortress Biotech Inc (NASDAQ:FBIO). This group of stocks’ market values are closest to HZN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAKE | 4 | 27103 | 0 |
| CVU | 5 | 10430 | 0 |
| AQMS | 5 | 687 | 0 |
| FBIO | 8 | 4865 | 1 |
| Average | 5.5 | 10771 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $9 million in HZN’s case. Fortress Biotech Inc (NASDAQ:FBIO) is the most popular stock in this table. On the other hand Lakeland Industries, Inc. (NASDAQ:LAKE) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Horizon Global Corp (NYSE:HZN) is even less popular than LAKE. Hedge funds dodged a bullet by taking a bearish stance towards HZN. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HZN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HZN investors were disappointed as the stock returned -9.7% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
