Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether Nomura Holdings, Inc. (NYSE:NMR) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Nomura Holdings, Inc. (NYSE:NMR) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare NMR to other stocks including Invitation Homes Inc. (NYSE:INVH), TransUnion (NYSE:TRU), and KB Financial Group, Inc. (NYSE:KB) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
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. Keeping this in mind we’re going to check out the fresh hedge fund action surrounding Nomura Holdings, Inc. (NYSE:NMR).
Hedge fund activity in Nomura Holdings, Inc. (NYSE:NMR)
Heading into the first quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in NMR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, holds the most valuable position in Nomura Holdings, Inc. (NYSE:NMR). LMR Partners has a $10.2 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $9.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism comprise D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position LMR Partners allocated the biggest weight to Nomura Holdings, Inc. (NYSE:NMR), around 0.48% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to NMR.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s also examine hedge fund activity in other stocks similar to Nomura Holdings, Inc. (NYSE:NMR). We will take a look at Invitation Homes Inc. (NYSE:INVH), TransUnion (NYSE:TRU), KB Financial Group, Inc. (NYSE:KB), and Deutsche Bank AG (NYSE:DB). All of these stocks’ market caps are closest to NMR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INVH | 33 | 1112180 | 3 |
| TRU | 37 | 931964 | -1 |
| KB | 5 | 47584 | -3 |
| DB | 12 | 1010511 | 0 |
| Average | 21.75 | 775560 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $776 million. That figure was $26 million in NMR’s case. TransUnion (NYSE:TRU) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Nomura Holdings, Inc. (NYSE:NMR) is even less popular than KB. Hedge funds dodged a bullet by taking a bearish stance towards NMR. 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 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately NMR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NMR investors were disappointed as the stock returned -28.9% 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.
