Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. 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 Retail Properties, Inc. (NYSE:NNN) from the perspective of those elite funds.
Is National Retail Properties, Inc. (NYSE:NNN) a buy right now? Investors who are in the know are turning bullish. The number of long hedge fund positions inched up by 4 lately. Our calculations also showed that NNN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). NNN was in 20 hedge funds’ portfolios at the end of the third quarter of 2019. There were 16 hedge funds in our database with NNN positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
Stuart Zimmer of Zimmer Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the key hedge fund action encompassing National Retail Properties, Inc. (NYSE:NNN).
How have hedgies been trading National Retail Properties, Inc. (NYSE:NNN)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NNN over the last 17 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Zimmer Partners held the most valuable stake in National Retail Properties, Inc. (NYSE:NNN), which was worth $113.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $56.2 million worth of shares. Millennium Management, Balyasny Asset Management, and Echo Street Capital Management 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 Zimmer Partners allocated the biggest weight to National Retail Properties, Inc. (NYSE:NNN), around 1.23% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, setting aside 0.78 percent of its 13F equity portfolio to NNN.
As one would reasonably expect, some big names were breaking ground themselves. Sculptor Capital established the most valuable position in National Retail Properties, Inc. (NYSE:NNN). Sculptor Capital had $2.8 million invested in the company at the end of the quarter. David Rodriguez-Fraile’s BlueMar Capital Management also made a $2.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management, David E. Shaw’s D E Shaw, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as National Retail Properties, Inc. (NYSE:NNN) but similarly valued. These stocks are Formula One Group (NASDAQ:FWONA), DaVita Inc (NYSE:DVA), Vail Resorts, Inc. (NYSE:MTN), and Black Knight, Inc. (NYSE:BKI). This group of stocks’ market valuations match NNN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FWONA | 19 | 371712 | 1 |
| DVA | 34 | 3079581 | -2 |
| MTN | 35 | 478623 | 2 |
| BKI | 42 | 883381 | -3 |
| Average | 32.5 | 1203324 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1203 million. That figure was $276 million in NNN’s case. Black Knight, Inc. (NYSE:BKI) is the most popular stock in this table. On the other hand Formula One Group (NASDAQ:FWONA) is the least popular one with only 19 bullish hedge fund positions. National Retail Properties, Inc. (NYSE:NNN) 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. 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. Unfortunately NNN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NNN investors were disappointed as the stock returned -0.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
