Is Huron Consulting Group Inc. (HURN) Going to Burn These Hedge Funds?

Reymerlyn Martin

Updated Sat, Dec 22, 2018, 9:08 PM

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Huron Consulting Group Inc. (NASDAQ:HURN).

Huron Consulting Group Inc. (NASDAQ:HURN) shareholders have witnessed an increase in support from the world's most elite money managers of late. HURN was in 11 hedge funds' portfolios at the end of September. There were 10 hedge funds in our database with HURN positions at the end of the previous quarter. Our calculations also showed that HURN isn't among the 30 most popular stocks among hedge funds.

If you'd ask most investors, hedge funds are viewed as worthless, outdated investment tools of the past. While there are greater than 8,000 funds trading at the moment, Our researchers choose to focus on the top tier of this club, around 700 funds. It is estimated that this group of investors manage bulk of the smart money's total capital, and by monitoring their highest performing equity investments, Insider Monkey has determined various investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship hedge fund strategy beat the S&P 500 index by 6 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

We're going to go over the recent hedge fund action surrounding Huron Consulting Group Inc. (NASDAQ:HURN).

Hedge fund activity in Huron Consulting Group Inc. (NASDAQ:HURN)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in HURN heading into this year. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Huron Consulting Group Inc. (NASDAQ:HURN), which was worth $7.9 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $5.4 million worth of shares. Moreover, D E Shaw, Millennium Management, and Citadel Investment Group were also bullish on Huron Consulting Group Inc. (NASDAQ:HURN), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Huron Consulting Group Inc. (NASDAQ:HURN). Arrowstreet Capital had $5.4 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $1.6 million position during the quarter. The following funds were also among the new HURN investors: Michael Platt and William Reeves's BlueCrest Capital Mgmt. and Noam Gottesman's GLG Partners.

Let's also examine hedge fund activity in other stocks similar to Huron Consulting Group Inc. (NASDAQ:HURN). We will take a look at Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), First Majestic Silver Corp (NYSE:AG), Mercer International Inc. (NASDAQ:MERC), and Nexeo Solutions, Inc. (NASDAQ:NXEO). This group of stocks' market valuations are closest to HURN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LTRPA,23,304324,2 AG,10,11509,3 MERC,19,215276,1 NXEO,30,531459,9 Average,20.5,265642,3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $27 million in HURN's case. Nexeo Solutions, Inc. (NASDAQ:NXEO) is the most popular stock in this table. On the other hand First Majestic Silver Corp (NYSE:AG) is the least popular one with only 10 bullish hedge fund positions. Huron Consulting Group Inc. (NASDAQ:HURN) 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. In this regard NXEO might be a better candidate to consider a long position.

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

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