Herc Holdings Inc. (HRI): Were Hedge Funds Right About This Stock?

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Herc Holdings Inc. (NYSE:HRI).

Is Herc Holdings Inc. (NYSE:HRI) a buy right now? Investors who are in the know were becoming hopeful. The number of long hedge fund bets increased by 3 in recent months. Herc Holdings Inc. (NYSE:HRI) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistic is 29. Our calculations also showed that HRI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 17 hedge funds in our database with HRI positions at the end of the first 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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 view the new hedge fund action encompassing Herc Holdings Inc. (NYSE:HRI).

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

At second quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in HRI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Icahn Capital LP held the most valuable stake in Herc Holdings Inc. (NYSE:HRI), which was worth $503.7 million at the end of the second quarter. On the second spot was GAMCO Investors which amassed $291.1 million worth of shares. Impax Asset Management, Electron Capital Partners, 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 Electron Capital Partners allocated the biggest weight to Herc Holdings Inc. (NYSE:HRI), around 2.95% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 2.47 percent of its 13F equity portfolio to HRI.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Impax Asset Management, managed by Ian Simm, created the most outsized position in Herc Holdings Inc. (NYSE:HRI). Impax Asset Management had $93.5 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $14.6 million investment in the stock during the quarter. The other funds with brand new HRI positions are Clint Carlson’s Carlson Capital, D. E. Shaw’s D E Shaw, and Ryan Caldwell’s Chiron Investment Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Herc Holdings Inc. (NYSE:HRI) but similarly valued. These stocks are Grocery Outlet Holding Corp. (NASDAQ:GO), Hillenbrand, Inc. (NYSE:HI), Intra-Cellular Therapies Inc (NASDAQ:ITCI), Asbury Automotive Group, Inc. (NYSE:ABG), Sogou Inc. (NYSE:SOGO), Liberty Latin America Ltd. (NASDAQ:LILAK), and Spirit Airlines Incorporated (NASDAQ:SAVE). This group of stocks’ market caps match HRI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GO 13 42791 -2
HI 14 23903 -1
ITCI 23 379057 8
ABG 26 821483 6
SOGO 19 147506 3
LILAK 27 556849 -2
SAVE 29 247716 5
Average 21.6 317044 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $317 million. That figure was $1070 million in HRI’s case. Spirit Airlines Incorporated (NASDAQ:SAVE) is the most popular stock in this table. On the other hand Grocery Outlet Holding Corp. (NASDAQ:GO) is the least popular one with only 13 bullish hedge fund positions. Herc Holdings Inc. (NYSE:HRI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HRI is 50.6. 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 gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on HRI as the stock returned 73.5% since the end of the second quarter (through 11/5) and outperformed the market by an even larger margin.

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