We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of HMN Financial, Inc. (NASDAQ:HMNF) based on that data.
Hedge fund interest in HMN Financial, Inc. (NASDAQ:HMNF) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare HMNF to other stocks including China Customer Relations Centers, Inc. (NASDAQ:CCRC), Precision Drilling Corp (NYSE:PDS), and Evolution Petroleum Corporation (NYSE:EPM) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26073" align="aligncenter" width="400"] Jim Simons of Renaissance Technologies[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's analyze the key hedge fund action surrounding HMN Financial, Inc. (NASDAQ:HMNF).
What does smart money think about HMN Financial, Inc. (NASDAQ:HMNF)?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options in HMNF a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Fourthstone LLC, managed by Phil Stone, holds the largest position in HMN Financial, Inc. (NASDAQ:HMNF). Fourthstone LLC has a $8.1 million position in the stock, comprising 7.4% of its 13F portfolio. The second largest stake is held by Paul Magidson, Jonathan Cohen. And Ostrom Enders of Castine Capital Management, with a $7.1 million position; 3.9% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism contain Jeffrey Gendell's Tontine Asset Management, Renaissance Technologies and . In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to HMN Financial, Inc. (NASDAQ:HMNF), around 7.36% of its 13F portfolio. Castine Capital Management is also relatively very bullish on the stock, earmarking 3.87 percent of its 13F equity portfolio to HMNF.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as HMN Financial, Inc. (NASDAQ:HMNF) but similarly valued. These stocks are China Customer Relations Centers, Inc. (NASDAQ:CCRC), Precision Drilling Corp (NYSE:PDS), Evolution Petroleum Corporation (NYSE:EPM), and DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT). This group of stocks' market caps resemble HMNF's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCRC,1,110,-1 PDS,6,2762,-5 EPM,9,8240,-2 DRTT,10,15572,-2 Average,6.5,6671,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $22 million in HMNF's case. DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT) is the most popular stock in this table. On the other hand China Customer Relations Centers, Inc. (NASDAQ:CCRC) is the least popular one with only 1 bullish hedge fund positions. HMN Financial, Inc. (NASDAQ:HMNF) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately HMNF wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HMNF investors were disappointed as the stock returned -18.1% during the second quarter 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 in 2020.
Disclosure: None. This article was originally published at Insider Monkey.