Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Hallador Energy Co (NASDAQ:HNRG).
Hallador Energy Co (NASDAQ:HNRG) has seen a decrease in hedge fund interest lately. Hallador Energy Co (NASDAQ:HNRG) was in 4 hedge funds' portfolios at the end of March. The all time high for this statistic is 12. There were 5 hedge funds in our database with HNRG positions at the end of the fourth quarter. Our calculations also showed that HNRG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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.
David Harding of Winton Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $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 take a peek at the new hedge fund action regarding Hallador Energy Co (NASDAQ:HNRG).
Do Hedge Funds Think HNRG Is A Good Stock To Buy Now?
At Q1's end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in HNRG a year ago. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the most valuable position in Hallador Energy Co (NASDAQ:HNRG). Renaissance Technologies has a $2.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Dan Rasmussen of Verdad Advisers, with a $2 million position; 0.6% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions consist of Richard Oldfield's Oldfield Partners, Israel Englander's Millennium Management and . In terms of the portfolio weights assigned to each position Verdad Advisers allocated the biggest weight to Hallador Energy Co (NASDAQ:HNRG), around 0.64% of its 13F portfolio. Oldfield Partners is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to HNRG.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Winton Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified HNRG as a viable investment and initiated a position in the stock.
Let's go over hedge fund activity in other stocks similar to Hallador Energy Co (NASDAQ:HNRG). We will take a look at Crown ElectroKinetics Corp. (NASDAQ:CRKN), MEDIROM Healthcare Technologies Inc. (NASDAQ:MRM), Asia Pacific Wire & Cable (NASDAQ:APWC), Communications Systems, Inc. (NASDAQ:JCS), Deswell Industries, Inc. (NASDAQ:DSWL), Friedman Industries (NYSE:FRD), and Strata Skin Sciences, Inc. (NASDAQ:SSKN). All of these stocks' market caps are similar to HNRG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRKN,2,371,2 MRM,1,218,1 APWC,2,1076,1 JCS,2,8743,0 DSWL,1,62,0 FRD,1,4518,0 SSKN,3,12047,-1 Average,1.7,3862,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.7 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $5 million in HNRG's case. Strata Skin Sciences, Inc. (NASDAQ:SSKN) is the most popular stock in this table. On the other hand MEDIROM Healthcare Technologies Inc. (NASDAQ:MRM) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Hallador Energy Co (NASDAQ:HNRG) is more popular among hedge funds. Our overall hedge fund sentiment score for HNRG is 64. 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. 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 returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on HNRG as the stock returned 52.4% since the end of March (through 6/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.