We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB).
Hedge fund interest in Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) shares was flat at the end of last quarter. This is usually a negative indicator. 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 MakeMyTrip Limited (NASDAQ:MMYT), WSFS Financial Corporation (NASDAQ:WSFS), and LivePerson, Inc. (NASDAQ:LPSN) to gather more data points. Our calculations also showed that OMAB 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.
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action surrounding Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB).
How have hedgies been trading Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. By comparison, 5 hedge funds held shares or bullish call options in OMAB a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB), which was worth $38.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $8 million worth of shares. Driehaus Capital, Weld Capital Management, and Bailard Inc 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 Weld Capital Management allocated the biggest weight to Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB), around 0.1% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to OMAB.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Stevens Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Weld Capital Management).
Let’s go over hedge fund activity in other stocks similar to Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB). These stocks are MakeMyTrip Limited (NASDAQ:MMYT), WSFS Financial Corporation (NASDAQ:WSFS), LivePerson, Inc. (NASDAQ:LPSN), and Crescent Point Energy Corp (NYSE:CPG). This group of stocks’ market valuations resemble OMAB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MMYT | 8 | 62829 | -3 |
| WSFS | 10 | 168789 | -5 |
| LPSN | 16 | 190487 | -1 |
| CPG | 10 | 64227 | -2 |
| Average | 11 | 121583 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $48 million in OMAB’s case. LivePerson, Inc. (NASDAQ:LPSN) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) is even less popular than MMYT. Hedge funds clearly dropped the ball on OMAB as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on OMAB as the stock returned 11.9% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
