Should You Avoid HSN, Inc. (HSNI)?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like HSN, Inc. (NASDAQ:HSNI).

Is HSN a healthy stock for your portfolio? The stock is down by 33% year-to-date and the best stock pickers are getting less bullish as the number of funds with long positions has retreated by 10 lately. At the end of this article we will also compare HSNI to other stocks, including New Residential Investment Corp (NYSE:NRZ), PrivateBancorp Inc (NASDAQ:PVTB), and Federated Investors Inc (NYSE:FII) to get a better sense of its popularity.

Today there are a lot of tools shareholders can use to grade publicly traded companies. Some of the most useful tools are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the top money managers can outclass the market by a healthy amount (see the details here).

With all of this in mind, let’s view the latest action regarding HSN, Inc. (NASDAQ:HSNI).

What does the smart money think about HSN, Inc. (NASDAQ:HSNI)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 50% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Matthew Iorio’s White Elm Capital has the number one position in HSN, Inc. (NASDAQ:HSNI), worth close to $38.5 million, amounting to 4% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $8.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism comprise D. E. Shaw’s D E Shaw, Mario Gabelli’s GAMCO Investors, and Jim Simons’ Renaissance Technologies.