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

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like National Retail Properties, Inc. (NYSE:NNN) .

Is National Retail Properties, Inc. (NYSE:NNN) a buy right now? Investors who are in the know are betting on the stock. The number of long hedge fund investments rose by 1 in recent months. NNN was in 20 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with NNN positions at the end of the previous quarter. At the end of this article we will also compare NNN to other stocks including Msci Inc (NYSE:MSCI), Ralph Lauren Corp (NYSE:RL), and Sabre Corp (NASDAQ:SABR) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How are hedge funds trading National Retail Properties, Inc. (NYSE:NNN)?

At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 5% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in NNN heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in National Retail Properties, Inc. (NYSE:NNN), worth close to $44 million. Sitting at the No. 2 spot is John Overdeck and David Siegel of Two Sigma Advisors, with a $14.1 million position. Remaining hedge funds and institutional investors with similar optimism encompass Israel Englander’s Millennium Management and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As aggregate interest increased, specific money managers have been driving this bullishness. LMR Partners, led by Ben Levine, Andrew Manuel and Stefan Renold, created the biggest position in National Retail Properties, Inc. (NYSE:NNN). LMR Partners had $6.9 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $3 million investment in the stock during the quarter. The other funds with brand new NNN positions are Noam Gottesman’s GLG Partners, Simon Sadler’s Segantii Capital, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at 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 Msci Inc (NYSE:MSCI), Ralph Lauren Corp (NYSE:RL), Sabre Corp (NASDAQ:SABR), and Foot Locker, Inc. (NYSE:FL). All of these stocks’ market caps are closest to NNN’s market cap.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $972 million. That figure was $103 million in NNN’s case. Sabre Corp (NASDAQ:SABR) is the most popular stock in this table. On the other hand Msci Inc (NYSE:MSCI) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks National Retail Properties, Inc. (NYSE:NNN) is even less popular than MSCI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None