Between June 25 and October 30th the Russell 2000 ETF (IWM) has lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worry over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller cap stocks than the normal investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Nidec Corporation (ADR) (NYSE:NJ) and see how the stock is affected by the recent hedge fund activity.
Nidec Corporation investors should pay attention that the hedge fund interest towards the stock remained unchanged in the third quarter and NJ was in 4 hedge funds’ portfolios at the end of September. At the end of this article we will also compare NJ to other stocks, including Prologis Inc (NYSE:PLD), ARM Holdings plc (ADR) (NASDAQ:ARMH), and Fiserv, Inc. (NASDAQ:FISV) to get a better sense of its popularity.
Follow Nidec Corp (NYSE:NJ)
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Today there are dozens of tools market participants employ to appraise publicly traded companies. Two of the most innovative tools are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the S&P 500 by a significant amount (see the details here).
Keeping this in mind, let’s review the key action surrounding Nidec Corporation (ADR) (NYSE:NJ).
Hedge fund activity in Nidec Corporation (ADR) (NYSE:NJ)
Heading into Q4, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among them, Jim Simons’ Renaissance Technologies held a $2.3 million stake in the company, followed by D.E. Shaw and Israel Englander’s Millennium Management, with stakes valued at $2.1 million and $0.8 million, respectively.
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 check out hedge fund activity in other stocks similar to Nidec Corporation (ADR) (NYSE:NJ). We will take a look at Prologis Inc (NYSE:PLD), ARM Holdings plc (ADR) (NASDAQ:ARMH), Fiserv, Inc. (NASDAQ:FISV), and Aviva Plc (ADR) (NYSE:AV). This group of stocks’ market valuations are similar to NJ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLD | 17 | 403248 | -11 |
| ARMH | 17 | 243693 | -4 |
| FISV | 21 | 360513 | -1 |
| AV | 7 | 3969 | -1 |
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $5 million in NJ’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table with 21 long positions. On the other hand Aviva Plc (ADR) (NYSE:AV) is the least popular one. Compared to these stocks Nidec Corporation (ADR) (NYSE:NJ) is even less popular than AV, which suggests that hedge funds aren’t very fond of this stock. Therefore, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is required.
