Hedge Funds Aren’t Crazy About National Western Life Insurance Company (NWLI) Anymore

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at National Western Life Insurance Company (NASDAQ:NWLI) from the perspective of those elite funds.

Is National Western Life Insurance Company (NASDAQ:NWLI) a buy here? The best stock pickers are in a pessimistic mood. The number of long hedge fund positions were cut by 3 lately. NWLI was in 8 hedge funds’ portfolios at the end of the third quarter of 2015. There were 11 hedge funds in our database with NWLI positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as First Commonwealth Financial (NYSE:FCF), Cray Inc. (NASDAQ:CRAY), and Tutor Perini Corp (NYSE:TPC) to gather more data points.

At the moment there are a large number of methods stock market investors have at their disposal to value publicly traded companies. A pair of the less utilized methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite investment managers can outpace their index-focused peers by a healthy margin (see the details here).

With all of this in mind, we’re going to analyze the new action encompassing National Western Life Insurance Company (NASDAQ:NWLI).

How are hedge funds trading National Western Life Insurance Company (NASDAQ:NWLI)?

Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 27% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Adam Wright and Gary Kohler’s Blue Clay Capital has the largest position in National Western Life Insurance Company (NASDAQ:NWLI), worth close to $9.9 million and accounting for 7.9% of its total 13F portfolio. The second largest stake is held by Royce & Associates, managed by Chuck Royce, which holds a $2.9 million position; less than 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism include Andy Redleaf’s Whitebox Advisors, Roger Ibbotson’s Zebra Capital Management and Jim Simons’s Renaissance Technologies.

Since National Western Life Insurance Company (NASDAQ:NWLI) has witnessed bearish sentiment from the smart money, it’s easy to see that there is a sect of money managers that elected to cut their full holdings by the end of the third quarter. Interestingly, Paul J. Isaac’s Arbiter Partners Capital Management sold off the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $2.8 million in stock. Israel Englander’s fund, Millennium Management, also dropped its holding, about $0.6 million worth of NWLI shares. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to National Western Life Insurance Company (NASDAQ:NWLI). These stocks are First Commonwealth Financial (NYSE:FCF), Cray Inc. (NASDAQ:CRAY), Tutor Perini Corp (NYSE:TPC), and EarthLink, Inc. (NASDAQ:ELNK). This group of stocks’ market caps are similar to NWLI’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. In the case of NWLI, that figure was a minor $18 million. EarthLink, Inc. (NASDAQ:ELNK) is the most popular stock in this table. On the other hand First Commonwealth Financial (NYSE:FCF) is the least popular one with only 7 bullish hedge fund positions. National Western Life Insurance Company (NASDAQ:NWLI) 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 ELNK might be a better candidate to consider a long position.