Where Do Hedge Funds Stand On HEXO Corp. (HEXO)?

In this article you are going to find out whether hedge funds think HEXO Corp. (NYSE:HEXO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is HEXO Corp. (NYSE:HEXO) a buy here? Money managers were becoming more confident. The number of long hedge fund bets inched up by 2 lately. HEXO Corp. (NYSE:HEXO) was in 6 hedge funds’ portfolios at the end of March. The all time high for this statistic is 10. Our calculations also showed that HEXO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 4 hedge funds in our database with HEXO positions at the end of the fourth quarter.

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Marshall of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 let’s go over the latest hedge fund action surrounding HEXO Corp. (NYSE:HEXO).

Do Hedge Funds Think HEXO Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HEXO over the last 23 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, D E Shaw held the most valuable stake in HEXO Corp. (NYSE:HEXO), which was worth $4.5 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $3.6 million worth of shares. Two Sigma Advisors, Gotham Asset Management, and Marshall Wace LLP 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 Gotham Asset Management allocated the biggest weight to HEXO Corp. (NYSE:HEXO), around 0.04% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to HEXO.

Now, key money managers were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, established the most valuable position in HEXO Corp. (NYSE:HEXO). D E Shaw had $4.5 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $1 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Greg Eisner’s Engineers Gate Manager.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as HEXO Corp. (NYSE:HEXO) but similarly valued. These stocks are Bluegreen Vacations Corporation (NYSE:BXG), Trueblue Inc (NYSE:TBI), ATN International, Inc. (NASDAQ:ATNI), Cincinnati Bell Inc. (NYSE:CBB), Contango Oil & Gas Company (NYSE:MCF), Great Southern Bancorp, Inc. (NASDAQ:GSBC), and Thryv Holdings, Inc. (NASDAQ:THRY). This group of stocks’ market caps resemble HEXO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $8 million in HEXO’s case. Trueblue Inc (NYSE:TBI) is the most popular stock in this table. On the other hand Bluegreen Vacations Corporation (NYSE:BXG) is the least popular one with only 3 bullish hedge fund positions. HEXO Corp. (NYSE:HEXO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HEXO is 41.7. 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. This is a slightly negative signal and 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 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately HEXO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); HEXO investors were disappointed as the stock returned -10.2% since the end of March (through 6/25) 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 most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.