Do Hedge Funds Love National Retail Properties, Inc. (NNN)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about National Retail Properties, Inc. (NYSE:NNN) in this article.

Is National Retail Properties, Inc. (NYSE:NNN) a safe investment right now? The best stock pickers were in a bearish mood. The number of bullish hedge fund positions dropped by 3 in recent months. National Retail Properties, Inc. (NYSE:NNN) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 23. Our calculations also showed that NNN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 22 hedge funds in our database with NNN positions at the end of the first quarter.

If you’d ask most shareholders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are greater than 8000 funds in operation at present, Our experts hone in on the moguls of this group, approximately 850 funds. These money managers have their hands on the lion’s share of the hedge fund industry’s total asset base, and by keeping an eye on their first-class equity investments, Insider Monkey has unearthed a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Clint Carlson of Carlson Capital

Keeping this in mind let’s analyze the recent hedge fund action surrounding National Retail Properties, Inc. (NYSE:NNN).

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

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the first quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in NNN a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Among these funds, Millennium Management held the most valuable stake in National Retail Properties, Inc. (NYSE:NNN), which was worth $80.1 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $25.6 million worth of shares. AQR Capital Management, Tudor Investment Corp, and Carlson Capital 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 Hill Winds Capital allocated the biggest weight to National Retail Properties, Inc. (NYSE:NNN), around 4.97% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, dishing out 0.55 percent of its 13F equity portfolio to NNN.

Judging by the fact that National Retail Properties, Inc. (NYSE:NNN) has faced falling interest from hedge fund managers, we can see that there is a sect of funds who were dropping their entire stakes heading into Q3. Intriguingly, Charles Fitzgerald’s V3 Capital dropped the biggest stake of the 750 funds watched by Insider Monkey, valued at close to $57.5 million in stock. John Khoury’s fund, Long Pond Capital, also dropped its stock, about $49.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds heading into Q3.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as National Retail Properties, Inc. (NYSE:NNN) but similarly valued. These stocks are Ovintiv Inc. (NYSE:OVV), Plains All American Pipeline, L.P. (NASDAQ:PAA), APA Corporation (NASDAQ:APA), First Citizens BancShares Inc. (NASDAQ:FCNCA), Fate Therapeutics Inc (NASDAQ:FATE), ContextLogic Inc. (NASDAQ:WISH), and Kilroy Realty Corp (NYSE:KRC). This group of stocks’ market valuations are similar to NNN’s market valuation.

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As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $751 million. That figure was $188 million in NNN’s case. Ovintiv Inc. (NYSE:OVV) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NASDAQ:PAA) is the least popular one with only 7 bullish hedge fund positions. National Retail Properties, Inc. (NYSE:NNN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NNN is 45. 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 negative signal and 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately NNN wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NNN investors were disappointed as the stock returned -0.5% since the end of June (through 10/22) 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 most of these stocks already outperformed the market in 2021.

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