It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during October and average hedge fund losing about 3%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 4 percentage points during the first half of Q4, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Newmark Group, Inc. (NASDAQ:NMRK) during the quarter below.
Is Newmark Group, Inc. (NASDAQ:NMRK) a cheap investment right now? The smart money is getting more optimistic. The number of long hedge fund bets improved by 7 lately. Our calculations also showed that nmrk isn’t among the 30 most popular stocks among hedge funds. NMRK was in 17 hedge funds’ portfolios at the end of the third quarter of 2018. There were 10 hedge funds in our database with NMRK holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s check out the key hedge fund action encompassing Newmark Group, Inc. (NASDAQ:NMRK).
Hedge fund activity in Newmark Group, Inc. (NASDAQ:NMRK)
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 70% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in NMRK at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Paulson & Co was the largest shareholder of Newmark Group, Inc. (NASDAQ:NMRK), with a stake worth $22.4 million reported as of the end of September. Trailing Paulson & Co was Gratia Capital, which amassed a stake valued at $15.3 million. Millennium Management, Point72 Asset Management, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in Newmark Group, Inc. (NASDAQ:NMRK). Marshall Wace LLP had $1.6 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new NMRK investors: Keith M. Rosenbloom’s Cruiser Capital Advisors, Mike Vranos’s Ellington, and Peter Muller’s PDT Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Newmark Group, Inc. (NASDAQ:NMRK) but similarly valued. These stocks are Albany International Corp. (NYSE:AIN), Realogy Holdings Corp (NYSE:RLGY), WNS (Holdings) Limited (NYSE:WNS), and Avis Budget Group Inc. (NASDAQ:CAR). All of these stocks’ market caps resemble NMRK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AIN | 13 | 91570 | 6 |
| RLGY | 23 | 722694 | 4 |
| WNS | 14 | 178577 | -3 |
| CAR | 29 | 809940 | 2 |
| Average | 19.75 | 450695 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $451 million. That figure was $70 million in NMRK’s case. Avis Budget Group Inc. (NASDAQ:CAR) is the most popular stock in this table. On the other hand Albany International Corp. (NYSE:AIN) is the least popular one with only 13 bullish hedge fund positions. Newmark Group, Inc. (NASDAQ:NMRK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CAR might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.