Did Hedge Funds Make The Right Call On National Instruments Corporation (NATI) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtNational Instruments Corporation (NASDAQ:NATI) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is National Instruments Corporation (NASDAQ:NATI) a bargain? Investors who are in the know were in a bearish mood. The number of bullish hedge fund positions shrunk by 1 recently. Our calculations also showed that NATI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most shareholders, hedge funds are perceived as underperforming, outdated financial tools of years past. While there are over 8000 funds with their doors open at the moment, Our researchers choose to focus on the elite of this club, approximately 850 funds. These money managers oversee most of the hedge fund industry’s total asset base, and by following their first-class stock picks, Insider Monkey has spotted a number of investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the fresh hedge fund action regarding National Instruments Corporation (NASDAQ:NATI).

How have hedgies been trading National Instruments Corporation (NASDAQ:NATI)?

At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the fourth quarter of 2019. By comparison, 28 hedge funds held shares or bullish call options in NATI a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

More specifically, Southport Management was the largest shareholder of National Instruments Corporation (NASDAQ:NATI), with a stake worth $496.2 million reported as of the end of September. Trailing Southport Management was Royce & Associates, which amassed a stake valued at $52.7 million. Bares Capital Management, D E Shaw, and Citadel Investment Group 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 Southport Management allocated the biggest weight to National Instruments Corporation (NASDAQ:NATI), around 5.53% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, earmarking 5.22 percent of its 13F equity portfolio to NATI.

Since National Instruments Corporation (NASDAQ:NATI) has witnessed falling interest from the smart money, we can see that there exists a select few fund managers who were dropping their entire stakes in the first quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest investment of all the hedgies followed by Insider Monkey, valued at close to $29.2 million in stock, and Leon Shaulov’s Maplelane Capital was right behind this move, as the fund dumped about $2.5 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to National Instruments Corporation (NASDAQ:NATI). We will take a look at MDU Resources Group Inc (NYSE:MDU), Science Applications International Corp (NYSE:SAIC), JOYY Inc. (NASDAQ:YY), and LPL Financial Holdings Inc (NASDAQ:LPLA). This group of stocks’ market valuations are closest to NATI’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $378 million. That figure was $706 million in NATI’s case. Science Applications International Corp (NYSE:SAIC) is the most popular stock in this table. On the other hand JOYY Inc. (NASDAQ:YY) is the least popular one with only 15 bullish hedge fund positions. National Instruments Corporation (NASDAQ:NATI) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately NATI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NATI were disappointed as the stock returned 17.9% during the same time period 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 many of these stocks already outperformed the market so far this year.

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