Did Hedge Funds Catch A Break With Norwegian Cruise Line Holdings Ltd (NCLH)?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) a buy right now? Investors who are in the know were taking a bearish view. The number of bullish hedge fund positions fell by 7 lately. Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) was in 36 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that NCLH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 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. Keeping this in mind let’s view the key hedge fund action encompassing Norwegian Cruise Line Holdings Ltd (NYSE:NCLH).

Bill Miller of Miller Value Partners

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

At Q3’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in NCLH a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Bill Miller’s Miller Value Partners has the most valuable position in Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), worth close to $96.1 million, amounting to 2.2% of its total 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $85.7 million call position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism consist of Matthew Halbower’s Pentwater Capital Management, Richard Merage’s MIG Capital and Doug Silverman and Alexander Klabin’s Senator Investment Group. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), around 5.99% of its 13F portfolio. MIG Capital is also relatively very bullish on the stock, setting aside 4.75 percent of its 13F equity portfolio to NCLH.

Because Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) has experienced falling interest from the aggregate hedge fund industry, logic holds that there were a few money managers that slashed their entire stakes last quarter. At the top of the heap, Renaissance Technologies sold off the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $9.2 million in stock. Brandon Haley’s fund, Holocene Advisors, also sold off its stock, about $5.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 7 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Norwegian Cruise Line Holdings Ltd (NYSE:NCLH). We will take a look at Guidewire Software Inc (NYSE:GWRE), Hill-Rom Holdings, Inc. (NYSE:HRC), Intellia Therapeutics, Inc. (NASDAQ:NTLA), Levi Strauss & Co. (NYSE:LEVI), Chegg Inc (NYSE:CHGG), Hubbell Incorporated (NYSE:HUBB), and Wynn Resorts, Limited (NASDAQ:WYNN). This group of stocks’ market caps match NCLH’s market cap.

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As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $947 million. That figure was $502 million in NCLH’s case. Hill-Rom Holdings, Inc. (NYSE:HRC) is the most popular stock in this table. On the other hand Hubbell Incorporated (NYSE:HUBB) is the least popular one with only 18 bullish hedge fund positions. Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NCLH is 55.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 and beat the market again by 3.6 percentage points. Unfortunately, NCLH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NCLH were disappointed as the stock returned -22% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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