Does Nutrien Ltd. (NYSE:NTR) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Nutrien Ltd. (NYSE:NTR) has experienced an increase in hedge fund sentiment of late. Our calculations also showed that NTR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Phill Gross of Adage Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the key hedge fund action regarding Nutrien Ltd. (NYSE:NTR).
Hedge fund activity in Nutrien Ltd. (NYSE:NTR)
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in NTR a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Nutrien Ltd. (NYSE:NTR) was held by D E Shaw, which reported holding $36.5 million worth of stock at the end of September. It was followed by Moerus Capital Management with a $32.1 million position. Other investors bullish on the company included Adage Capital Management, McKinley Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Moerus Capital Management allocated the biggest weight to Nutrien Ltd. (NYSE:NTR), around 10.95% of its portfolio. Horseman Capital Management is also relatively very bullish on the stock, designating 6.7 percent of its 13F equity portfolio to NTR.
As one would reasonably expect, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Nutrien Ltd. (NYSE:NTR). Arrowstreet Capital had $7.8 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $7.6 million position during the quarter. The other funds with brand new NTR positions are Paul Marshall and Ian Wace’s Marshall Wace, Noam Gottesman’s GLG Partners, and BP Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Nutrien Ltd. (NYSE:NTR) but similarly valued. We will take a look at Alcon Inc. (NYSE:ALC), Canon Inc. (NYSE:CAJ), Motorola Solutions Inc (NYSE:MSI), and Nokia Corporation (NYSE:NOK). This group of stocks’ market caps resemble NTR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALC | 22 | 482231 | 4 |
| CAJ | 8 | 95141 | 2 |
| MSI | 33 | 932771 | 8 |
| NOK | 23 | 417397 | -1 |
| Average | 21.5 | 481885 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $482 million. That figure was $175 million in NTR’s case. Motorola Solutions Inc (NYSE:MSI) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 8 bullish hedge fund positions. Nutrien Ltd. (NYSE:NTR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NTR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NTR were disappointed as the stock returned -4.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
