We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Harmonic Inc (NASDAQ:HLIT).
Harmonic Inc (NASDAQ:HLIT) has seen an increase in hedge fund interest of late. Harmonic Inc (NASDAQ:HLIT) was in 16 hedge funds’ portfolios at the end of March. The all time high for this statistic is 19. Our calculations also showed that HLIT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Philip Hempleman of Ardsley Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind let’s go over the latest hedge fund action surrounding Harmonic Inc (NASDAQ:HLIT).
Do Hedge Funds Think HLIT Is A Good Stock To Buy Now?
At first quarter’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the fourth quarter of 2020. By comparison, 16 hedge funds held shares or bullish call options in HLIT a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Scopia Capital held the most valuable stake in Harmonic Inc (NASDAQ:HLIT), which was worth $76 million at the end of the fourth quarter. On the second spot was Prelude Capital (previously Springbok Capital) which amassed $9.9 million worth of shares. Two Sigma Advisors, Royce & Associates, and Arrowstreet 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 Scopia Capital allocated the biggest weight to Harmonic Inc (NASDAQ:HLIT), around 9.42% of its 13F portfolio. Divisar Capital is also relatively very bullish on the stock, setting aside 0.28 percent of its 13F equity portfolio to HLIT.
Consequently, key money managers were breaking ground themselves. Ardsley Partners, managed by Philip Hempleman, created the most valuable position in Harmonic Inc (NASDAQ:HLIT). Ardsley Partners had $1.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Mark Broach’s Manatuck Hill Partners, Greg Eisner’s Engineers Gate Manager, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Harmonic Inc (NASDAQ:HLIT) but similarly valued. These stocks are VBI Vaccines, Inc. (NASDAQ:VBIV), CAI International Inc (NYSE:CAI), Corporacion America Airports SA (NYSE:CAAP), Community Trust Bancorp, Inc. (NASDAQ:CTBI), Karyopharm Therapeutics Inc (NASDAQ:KPTI), Esperion Therapeutics (NASDAQ:ESPR), and Endeavour Silver Corp. (NYSE:EXK). This group of stocks’ market caps resemble HLIT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VBIV | 7 | 173094 | -1 |
| CAI | 17 | 123797 | 0 |
| CAAP | 2 | 2027 | -2 |
| CTBI | 9 | 20137 | -2 |
| KPTI | 21 | 146474 | 2 |
| ESPR | 17 | 118866 | 1 |
| EXK | 10 | 9024 | 0 |
| Average | 11.9 | 84774 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $104 million in HLIT’s case. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is the most popular stock in this table. On the other hand Corporacion America Airports SA (NYSE:CAAP) is the least popular one with only 2 bullish hedge fund positions. Harmonic Inc (NASDAQ:HLIT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HLIT is 68.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately HLIT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on HLIT were disappointed as the stock returned 4.5% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Harmonic Inc (NASDAQ:HLIT)
Follow Harmonic Inc (NASDAQ:HLIT)
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Disclosure: None. This article was originally published at Insider Monkey.
