Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Hudson Ltd. (NYSE:HUD) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Hudson Ltd. (NYSE:HUD) was in 10 hedge funds’ portfolios at the end of December. HUD investors should pay attention to a decrease in enthusiasm from smart money of late. There were 12 hedge funds in our database with HUD positions at the end of the previous quarter. Our calculations also showed that HUD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the fresh hedge fund action surrounding Hudson Ltd. (NYSE:HUD).
Hedge fund activity in Hudson Ltd. (NYSE:HUD)
Heading into the first quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in HUD a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Hudson Ltd. (NYSE:HUD), with a stake worth $20.7 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $5.5 million. D E Shaw, Two Sigma Advisors, and MIK 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 MIK Capital allocated the biggest weight to Hudson Ltd. (NYSE:HUD), around 0.56% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.07 percent of its 13F equity portfolio to HUD.
Because Hudson Ltd. (NYSE:HUD) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management dropped the largest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $3.5 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Hudson Ltd. (NYSE:HUD). These stocks are Universal Corp (NYSE:UVV), Herc Holdings Inc. (NYSE:HRI), Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), and NexTier Oilfield Solutions Inc. (NYSE:NEX). This group of stocks’ market valuations resemble HUD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UVV | 14 | 116152 | -2 |
| HRI | 21 | 572257 | -7 |
| MDGL | 19 | 328636 | 6 |
| NEX | 29 | 563682 | 6 |
| Average | 20.75 | 395182 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $395 million. That figure was $39 million in HUD’s case. NexTier Oilfield Solutions Inc. (NYSE:NEX) is the most popular stock in this table. On the other hand Universal Corp (NYSE:UVV) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Hudson Ltd. (NYSE:HUD) is even less popular than UVV. Hedge funds dodged a bullet by taking a bearish stance towards HUD. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. Unfortunately HUD wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); HUD investors were disappointed as the stock returned -64.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
