The odds of Greece staying in the euro have declined dramatically this weekend after Prime Minister Alexis Tsipras decided to hold a July 5th referendum on the terms demanded by Greece’s creditors. After the troubling announcement coming out of the Greek Government last night about the closure of Greek banks for one week to avert bank runs and the collapse of its financial system, National Bank of Greece (ADR) (NYSE:NBG) has started trading with its shares declining in excess of 19%. Greek government has announced capital controls to avoid liquidity drain under which, capital restrictions of 60 Euros or $66 are in effect for the entire week. The capital restriction might save the banks from collapsing under the weight of massive withdrawals but it is likely to have a hampering impact over the economy in the short term. Avoiding liquidity drain is not the only challenge in front of Greece, as the country is required to repay its credit bailout loan of 1.6 billion Euros or $1.76 billion to the International Monetary Fund (IMF). According to experts, the country would face exit from the Eurozone in case of a default tomorrow making its economical conditions even worse. With these financial circumstances under consideration, more depreciation in the shares of National Bank of Greece S.A. (NYSE:NBG) is expected in the upcoming trading sessions. Its shares have already declined 43.3% year-to-date.
What is interesting is that our hedge fund indicator reported a bearish outlook for the shares of National Bank of Greece (ADR) (NYSE:NBG) in May itself. Upon analyzing the holdings of over 700 hedge funds that we track we Insider Monkey, only 13 hedge fund managers had reported investments in the National Bank of Greece with net invested amount of $60.84 million against last quarter’s investments of $79.43 million made by 17 hedge fund managers.
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 144% over the last 32 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
The decline in the share prices of the National Bank of Greece indicates the importance of studying hedge fund holdings. Let’s check out the recent action regarding National Bank of Greece (ADR) (NYSE:NBG).
How have hedgies been trading National Bank of Greece S.A. (NYSE:NBG)?
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of hedge fund managers who were brave enough to bet on NBG.
Of the funds tracked by Insider Monkey, J Kevin Kenny Jr’s Emerging Sovereign Group had the largest position in National Bank of Greece S.A. (NYSE:NBG), worth close to $16.9 million, amounting to 0.6% of its total 13F portfolio. On Emerging Sovereign Group’s heels is Dalton Investments, led by Gifford Combs, holding a $12.8 million position; 4% of its 13F portfolio is allocated to the stock. Other peers that are bullish include Scott Lawrence Swid’s SLS Management, Jim Simons’s Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Because National Bank of Greece (ADR) (NYSE:NBG) has faced falling interest from the smart money, logic holds that there exists a select few money managers that slashed their entire stakes during the first quarter. Interestingly, Buckley Ratchford’s Wingspan Investment Management dumped the biggest stake of the 700 funds watched by Insider Monkey, totaling close to $5.5 million in stock, and Dinakar Singh of TPG-AXON Management LP was right behind this move, as the fund said goodbye to about $3.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 4 funds in first quarter.
Overall, hedge funds’ positions in NBG were small for a $4 billion company and they were even trimming those. Our hedge fund sentiment got it right by downgrading National Bank of Greece S.A. several weeks in advance of the current crisis.
Disclosure: None
