Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Napco Security Technologies Inc (NASDAQ:NSSC).
Is Napco Security Technologies Inc (NASDAQ:NSSC) worth your attention right now? Investors who are in the know are in a pessimistic mood. The number of bullish hedge fund positions dropped by 2 in recent months. Our calculations also showed that NSSC isn’t among the 30 most popular stocks among hedge funds (see the video below). NSSC was in 5 hedge funds’ portfolios at the end of June. There were 7 hedge funds in our database with NSSC holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the recent hedge fund action surrounding Napco Security Technologies Inc (NASDAQ:NSSC).
Hedge fund activity in Napco Security Technologies Inc (NASDAQ:NSSC)
At the end of the second quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NSSC over the last 16 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Napco Security Technologies Inc (NASDAQ:NSSC), which was worth $5.3 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $3.7 million worth of shares. Moreover, Manatuck Hill Partners, PEAK6 Capital Management, and Navellier & Associates were also bullish on Napco Security Technologies Inc (NASDAQ:NSSC), allocating a large percentage of their portfolios to this stock.
Due to the fact that Napco Security Technologies Inc (NASDAQ:NSSC) has faced falling interest from the smart money, we can see that there lies a certain “tier” of funds that elected to cut their entire stakes by the end of the second quarter. Interestingly, Josh Goldberg’s G2 Investment Partners Management said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, valued at an estimated $1.6 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $0.2 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 2 funds by the end of the second quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Napco Security Technologies Inc (NASDAQ:NSSC). These stocks are First Financial Corporation (NASDAQ:THFF), ObsEva SA (NASDAQ:OBSV), Changyou.Com Limited (NASDAQ:CYOU), and Niu Technologies (NASDAQ:NIU). This group of stocks’ market values resemble NSSC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THFF | 9 | 14616 | 2 |
| OBSV | 8 | 64275 | -3 |
| CYOU | 9 | 29815 | -2 |
| NIU | 6 | 25149 | 4 |
| Average | 8 | 33464 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $12 million in NSSC’s case. First Financial Corporation (NASDAQ:THFF) is the most popular stock in this table. On the other hand Niu Technologies (NASDAQ:NIU) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Napco Security Technologies Inc (NASDAQ:NSSC) is even less popular than NIU. Hedge funds dodged a bullet by taking a bearish stance towards NSSC. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NSSC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NSSC investors were disappointed as the stock returned -14% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
