Should You Follow Billionaire Hedge Funds Into Hill-Rom Holdings, Inc. (HRC)?

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Hill-Rom Holdings, Inc. (NYSE:HRC), and what that likely means for the prospects of the company and its stock.

Hill-Rom Holdings, Inc. (NYSE:HRC) has seen an increase in enthusiasm from smart money of late. HRC was in 32 hedge funds’ portfolios at the end of September. There were 31 hedge funds in our database with HRC positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Aspen Technology, Inc. (NASDAQ:AZPN), Cypress Semiconductor Corporation (NASDAQ:CY), and Apple Hospitality REIT Inc (NYSE:APLE) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, we’re going to take a peek at the key action surrounding Hill-Rom Holdings, Inc. (NYSE:HRC).

What does the smart money think about Hill-Rom Holdings, Inc. (NYSE:HRC)?

Heading into the fourth quarter of 2016, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 3% uptick from the previous quarter. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the largest position in Hill-Rom Holdings, Inc. (NYSE:HRC), worth close to $100.9 million. The second largest stake is held by Anand Parekh of Alyeska Investment Group, with a $69.6 million position. Some other professional money managers that are bullish contain Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and D E Shaw.

As aggregate interest increased, key hedge funds have been driving this bullishness. Partner Fund Management, managed by Christopher James, assembled the most valuable position in Hill-Rom Holdings, Inc. (NYSE:HRC). Partner Fund Management had $7.8 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $5.8 million position during the quarter. The other funds with new positions in the stock are Ira Unschuld’s Brant Point Investment Management, Neil Chriss’ Hutchin Hill Capital, and Michael Platt and William Reeves’ BlueCrest Capital Mgmt..

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Hill-Rom Holdings, Inc. (NYSE:HRC) but similarly valued. We will take a look at Aspen Technology, Inc. (NASDAQ:AZPN), Cypress Semiconductor Corporation (NASDAQ:CY), Apple Hospitality REIT Inc (NYSE:APLE), and Ryder System, Inc. (NYSE:R). All of these stocks’ market caps match HRC’s market cap.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $504 million in HRC’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Hill-Rom Holdings, Inc. (NYSE:HRC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None