At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is National General Holdings Corp (NASDAQ:NGHC) a buy here? Money managers are becoming less confident. The number of long hedge fund investments were cut by 4 recently. NGHC was in 15 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with NGHC positions at the end of the previous quarter. At the end of this article we will also compare NGHC to other stocks including South Jersey Industries Inc (NYSE:SJI), Chemed Corporation (NYSE:CHE), and Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) to get a better sense of its popularity.
Follow National General Holdings Corp. (NASDAQ:NGHC)
Follow National General Holdings Corp. (NASDAQ:NGHC)
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 General Holdings Corp (NASDAQ:NGHC)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decrease of 21% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in NGHC at the beginning of this year. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Peter S. Park’s Park West Asset Management has the most valuable position in National General Holdings Corp (NASDAQ:NGHC), worth close to $63.5 million, accounting for 5.8% of its total 13F portfolio. On Park West Asset Management’s heels is MSDC Management, led by Marc Lisker, Glenn Fuhrman and John Phelan, which holds a $25.9 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism encompass Robert B. Gillam’s McKinley Capital Management, Israel Englander’s Millennium Management and Jay Petschek and Steven Major’s Corsair 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.
Because National General Holdings Corp (NASDAQ:NGHC) has weathered bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of funds that slashed their positions entirely in the third quarter. Intriguingly, Michael Blitzer’s Kingstown Capital Management sold off the biggest stake of all the investors studied by Insider Monkey, comprising close to $4.8 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also cut its stock, about $2.9 million worth.
Let’s go over hedge fund activity in other stocks similar to National General Holdings Corp (NASDAQ:NGHC). These stocks are South Jersey Industries Inc (NYSE:SJI), Chemed Corporation (NYSE:CHE), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), and WebMD Health Corp. (NASDAQ:WBMD). This group of stocks’ market valuations resemble NGHC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SJI | 8 | 12610 | 3 |
| CHE | 15 | 243945 | -2 |
| CCO | 16 | 73696 | 1 |
| WBMD | 29 | 468760 | 2 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $116 million in NGHC’s case. WebMD Health Corp. (NASDAQ:WBMD) is the most popular stock in this table. On the other hand South Jersey Industries Inc (NYSE:SJI) is the least popular one with only 8 bullish hedge fund positions. National General Holdings Corp (NASDAQ:NGHC) 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 WBMD might be a better candidate to consider taking a long position in.
Disclosure: None
