Is Houghton Mifflin Harcourt Co (HMHC) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Houghton Mifflin Harcourt Co (NASDAQ:HMHC).

Is Houghton Mifflin Harcourt Co (NASDAQ:HMHC) a healthy stock for your portfolio? The best stock pickers were betting on the stock. The number of long hedge fund bets advanced by 6 in recent months. Houghton Mifflin Harcourt Co (NASDAQ:HMHC) was in 27 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. Our calculations also showed that HMHC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a gander at the key hedge fund action encompassing Houghton Mifflin Harcourt Co (NASDAQ:HMHC).

Jamie Zimmerman of Litespeed Management

Do Hedge Funds Think HMHC Is A Good Stock To Buy Now?

At third quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in HMHC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Engine Capital held the most valuable stake in Houghton Mifflin Harcourt Co (NASDAQ:HMHC), which was worth $40.5 million at the end of the third quarter. On the second spot was Rubric Capital Management which amassed $36.6 million worth of shares. Water Street Capital, Litespeed Management, and Nishkama 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 Litespeed Management allocated the biggest weight to Houghton Mifflin Harcourt Co (NASDAQ:HMHC), around 24.58% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, earmarking 11.07 percent of its 13F equity portfolio to HMHC.

Now, key hedge funds were leading the bulls’ herd. Leonard Green & Partners, managed by Leonard Green, initiated the most valuable position in Houghton Mifflin Harcourt Co (NASDAQ:HMHC). Leonard Green & Partners had $13.4 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also made a $7.1 million investment in the stock during the quarter. The other funds with brand new HMHC positions are Greg Eisner’s Engineers Gate Manager, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), and Nick Thakore’s Diametric Capital.

Let’s go over hedge fund activity in other stocks similar to Houghton Mifflin Harcourt Co (NASDAQ:HMHC). We will take a look at WideOpenWest, Inc. (NYSE:WOW), Porch Group, Inc. (NASDAQ:PRCH), Peabody Energy Corporation (NYSE:BTU), The Beachbody Company Inc. (NYSE:BODY), CBIZ, Inc. (NYSE:CBZ), Patterson-UTI Energy, Inc. (NASDAQ:PTEN), and Stewart Information Services Corp (NYSE:STC). This group of stocks’ market caps match HMHC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $260 million in HMHC’s case. Peabody Energy Corporation (NYSE:BTU) is the most popular stock in this table. On the other hand The Beachbody Company Inc. (NYSE:BODY) is the least popular one with only 13 bullish hedge fund positions. Houghton Mifflin Harcourt Co (NASDAQ:HMHC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HMHC is 75.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Hedge funds were also right about betting on HMHC as the stock returned 15.4% since the end of Q3 (through 12/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Suggested Articles:

• 15 Largest Cruise Companies In The World
• 10 Best Future Food Stocks to Invest in Today
• 15 Largest Global IPOs of All Time

Disclosure: None. This article was originally published at Insider Monkey.