Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Nasdaq, Inc. (NASDAQ:NDAQ) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Hedge fund interest in Nasdaq, Inc. (NASDAQ:NDAQ) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare NDAQ to other stocks including Shinhan Financial Group Co., Ltd. (NYSE:SHG), AmerisourceBergen Corporation (NYSE:ABC), and Martin Marietta Materials, Inc. (NYSE:MLM) to get a better sense of its popularity.
Today there are plenty of formulas investors employ to value stocks. A duo of the most under-the-radar formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best fund managers can outpace the market by a solid amount (see the details here).
Dmitry Balyasny of Balyasny Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the new hedge fund action regarding Nasdaq, Inc. (NASDAQ:NDAQ).
Hedge fund activity in Nasdaq, Inc. (NASDAQ:NDAQ)
Heading into the first quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NDAQ over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Nasdaq, Inc. (NASDAQ:NDAQ) was held by Two Sigma Advisors, which reported holding $46.7 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $19.3 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Adage Capital Management. In terms of the portfolio weights assigned to each position Sloane Robinson Investment Management allocated the biggest weight to Nasdaq, Inc. (NASDAQ:NDAQ), around 3.34% of its 13F portfolio. Cognios Capital is also relatively very bullish on the stock, earmarking 0.92 percent of its 13F equity portfolio to NDAQ.
Judging by the fact that Nasdaq, Inc. (NASDAQ:NDAQ) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who sold off their full holdings heading into Q4. Interestingly, Jeffrey Talpins’s Element Capital Management cut the largest stake of the 750 funds followed by Insider Monkey, valued at about $1.9 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund said goodbye to about $0.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nasdaq, Inc. (NASDAQ:NDAQ) but similarly valued. We will take a look at Shinhan Financial Group Co., Ltd. (NYSE:SHG), AmerisourceBergen Corporation (NYSE:ABC), Martin Marietta Materials, Inc. (NYSE:MLM), and Teleflex Incorporated (NYSE:TFX). This group of stocks’ market values are similar to NDAQ’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SHG | 3 | 8979 | -2 |
| ABC | 40 | 580579 | 2 |
| MLM | 52 | 2345404 | 9 |
| TFX | 32 | 936280 | 4 |
| Average | 31.75 | 967811 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $968 million. That figure was $181 million in NDAQ’s case. Martin Marietta Materials, Inc. (NYSE:MLM) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 3 bullish hedge fund positions. Nasdaq, Inc. (NASDAQ:NDAQ) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on NDAQ as the stock returned -20% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
