Hedge Funds Are Souring On NI Holdings, Inc. (NODK)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded NI Holdings, Inc. (NASDAQ:NODK) based on those filings.

NI Holdings, Inc. (NASDAQ:NODK) has seen a decrease in enthusiasm from smart money of late. Our calculations also showed that NODK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Price of MFP Investors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the fresh hedge fund action encompassing NI Holdings, Inc. (NASDAQ:NODK).

What does smart money think about NI Holdings, Inc. (NASDAQ:NODK)?

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the fourth quarter of 2019. By comparison, 6 hedge funds held shares or bullish call options in NODK a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Newtyn Management was the largest shareholder of NI Holdings, Inc. (NASDAQ:NODK), with a stake worth $8.3 million reported as of the end of September. Trailing Newtyn Management was MFP Investors, which amassed a stake valued at $7.2 million. AWH Capital, Minerva Advisors, and Renaissance Technologies 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 AWH Capital allocated the biggest weight to NI Holdings, Inc. (NASDAQ:NODK), around 13.67% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, dishing out 2.87 percent of its 13F equity portfolio to NODK.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified NODK as a viable investment and initiated a position in the stock.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as NI Holdings, Inc. (NASDAQ:NODK) but similarly valued. We will take a look at The Manitowoc Company, Inc. (NYSE:MTW), MetroCity Bankshares, Inc. (NASDAQ:MCBS), Powell Industries, Inc. (NASDAQ:POWL), and Barrett Business Services, Inc. (NASDAQ:BBSI). This group of stocks’ market caps resemble NODK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $21 million in NODK’s case. The Manitowoc Company, Inc. (NYSE:MTW) is the most popular stock in this table. On the other hand MetroCity Bankshares, Inc. (NASDAQ:MCBS) is the least popular one with only 4 bullish hedge fund positions. NI Holdings, Inc. (NASDAQ:NODK) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately NODK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NODK investors were disappointed as the stock returned 15% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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