We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of National Health Investors Inc (NYSE:NHI).
National Health Investors Inc (NYSE:NHI) has experienced a decrease in hedge fund sentiment recently. Our calculations also showed that NHI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the fresh hedge fund action regarding National Health Investors Inc (NYSE:NHI).
What have hedge funds been doing with National Health Investors Inc (NYSE:NHI)?
Heading into the first quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in NHI a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of National Health Investors Inc (NYSE:NHI), with a stake worth $73.3 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $15 million. Two Sigma Advisors, Carlson Capital, and Citadel Investment Group 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 Carlson Capital allocated the biggest weight to National Health Investors Inc (NYSE:NHI), around 0.21% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to NHI.
Judging by the fact that National Health Investors Inc (NYSE:NHI) has experienced declining sentiment from hedge fund managers, logic holds that there were a few hedgies who sold off their positions entirely in the third quarter. At the top of the heap, Xiuping Li’s Opti Capital Management dropped the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $4.9 million in stock. Donald Sussman’s fund, Paloma Partners, also dropped its stock, about $1.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to National Health Investors Inc (NYSE:NHI). We will take a look at Exponent, Inc. (NASDAQ:EXPO), FireEye Inc (NASDAQ:FEYE), Switch, Inc. (NYSE:SWCH), and John Bean Technologies Corporation (NYSE:JBT). All of these stocks’ market caps resemble NHI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EXPO | 17 | 110746 | -4 |
| FEYE | 30 | 267777 | 1 |
| SWCH | 18 | 303775 | 3 |
| JBT | 16 | 143502 | 1 |
| Average | 20.25 | 206450 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $143 million in NHI’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand John Bean Technologies Corporation (NYSE:JBT) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks National Health Investors Inc (NYSE:NHI) is even less popular than JBT. Hedge funds dodged a bullet by taking a bearish stance towards NHI. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately NHI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NHI investors were disappointed as the stock returned -40.1% during the same time period 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 most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
