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 Hubbell Incorporated (NYSE:HUBB).
Hubbell Incorporated (NYSE:HUBB) has seen an increase in support from the world’s most elite money managers recently. Our calculations also showed that HUBB 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the new hedge fund action surrounding Hubbell Incorporated (NYSE:HUBB).
How are hedge funds trading Hubbell Incorporated (NYSE:HUBB)?
Heading into the fourth quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HUBB over the last 17 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Hubbell Incorporated (NYSE:HUBB) was held by Royce & Associates, which reported holding $102.5 million worth of stock at the end of September. It was followed by Impax Asset Management with a $65.2 million position. Other investors bullish on the company included Arrowstreet Capital, Carlson Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Hubbell Incorporated (NYSE:HUBB), around 3.92% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.95 percent of its 13F equity portfolio to HUBB.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, established the most valuable position in Hubbell Incorporated (NYSE:HUBB). Scopus Asset Management had $13.1 million invested in the company at the end of the quarter. Larry Foley and Paul Farrell’s Bronson Point Partners also made a $3.3 million investment in the stock during the quarter. The following funds were also among the new HUBB investors: Michael Gelband’s ExodusPoint Capital, Matthew Tewksbury’s Stevens Capital Management, and David Andre and Astro Teller’s Cerebellum Capital.
Let’s go over hedge fund activity in other stocks similar to Hubbell Incorporated (NYSE:HUBB). These stocks are FLIR Systems, Inc. (NASDAQ:FLIR), Americold Realty Trust (NYSE:COLD), Woori Financial Group Inc. (NYSE:WF), and Pearson PLC (NYSE:PSO). This group of stocks’ market caps are closest to HUBB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLIR | 22 | 269438 | 2 |
| COLD | 27 | 472297 | -3 |
| WF | 2 | 2420 | 1 |
| PSO | 3 | 5491 | -1 |
| Average | 13.5 | 187412 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $383 million in HUBB’s case. Americold Realty Trust (NYSE:COLD) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. Hubbell Incorporated (NYSE:HUBB) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on HUBB as the stock returned 12.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
