How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Huntsman Corporation (NYSE:HUN).
Is HUN a good stock to buy? Huntsman Corporation (NYSE:HUN) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistic is 47. HUN has experienced a decrease in enthusiasm from smart money lately. There were 35 hedge funds in our database with HUN holdings at the end of March. Our calculations also showed that HUN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Donald Yacktman of Yacktman Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to analyze the key hedge fund action regarding Huntsman Corporation (NYSE:HUN).
Do Hedge Funds Think HUN Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in HUN over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Yacktman Asset Management, managed by Donald Yacktman, holds the number one position in Huntsman Corporation (NYSE:HUN). Yacktman Asset Management has a $178.1 million position in the stock, comprising 1.7% of its 13F portfolio. On Yacktman Asset Management’s heels is Chuck Royce of Royce & Associates, with a $82.2 million position; 0.6% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish consist of Alexander Roepers’s Atlantic Investment Management, Renaissance Technologies and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to Huntsman Corporation (NYSE:HUN), around 16.78% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, dishing out 2.98 percent of its 13F equity portfolio to HUN.
Since Huntsman Corporation (NYSE:HUN) has experienced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies who were dropping their entire stakes heading into Q3. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $40.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $26.5 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 8 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Huntsman Corporation (NYSE:HUN) but similarly valued. These stocks are Valvoline Inc. (NYSE:VVV), Clover Health Investments, Corp. (NASDAQ:CLOV), Hutchison China MediTech Limited (NASDAQ:HCM), Descartes Systems Group (NASDAQ:DSGX), Healthcare Trust Of America Inc (NYSE:HTA), South State Corporation (NASDAQ:SSB), and Nordstrom, Inc. (NYSE:JWN). This group of stocks’ market values are closest to HUN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VVV | 26 | 644049 | 3 |
| CLOV | 23 | 1415710 | 0 |
| HCM | 10 | 59992 | 2 |
| DSGX | 15 | 307454 | 4 |
| HTA | 23 | 226444 | 6 |
| SSB | 18 | 298543 | -6 |
| JWN | 31 | 445649 | -3 |
| Average | 20.9 | 485406 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $485 million. That figure was $582 million in HUN’s case. Nordstrom, Inc. (NYSE:JWN) is the most popular stock in this table. On the other hand Hutchison China MediTech Limited (NASDAQ:HCM) is the least popular one with only 10 bullish hedge fund positions. Huntsman Corporation (NYSE:HUN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HUN is 54.7. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on HUN as the stock returned 21.3% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Huntsman Corp (NYSE:HUN)
Follow Huntsman Corp (NYSE:HUN)
Suggested Articles:
- 10 Best Airline Stocks To Buy For 2021
- 11 Biggest Telecom Companies In The World
- 15 Biggest Tech Hardware Companies In The World
Disclosure: None. This article was originally published at Insider Monkey.
