Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. Trends reversed 180 degrees during the first quarter amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the first quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards NIC Inc. (NASDAQ:EGOV).
NIC Inc. (NASDAQ:EGOV) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of the first quarter of 2019. 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 Career Education Corp. (NASDAQ:CECO), Rambus Inc. (NASDAQ:RMBS), and Xperi Corporation (NASDAQ:XPER) to gather more data points.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the new hedge fund action surrounding NIC Inc. (NASDAQ:EGOV).
Hedge fund activity in NIC Inc. (NASDAQ:EGOV)
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards EGOV over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in NIC Inc. (NASDAQ:EGOV) was held by D E Shaw, which reported holding $23.4 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $18.5 million position. Other investors bullish on the company included Renaissance Technologies, GLG Partners, and Two Sigma Advisors.
Seeing as NIC Inc. (NASDAQ:EGOV) has experienced declining sentiment from the smart money, logic holds that there is a sect of money managers who sold off their positions entirely heading into Q3. It’s worth mentioning that Alexander Medina Seaver’s Stadium Capital Management said goodbye to the largest position of the 700 funds monitored by Insider Monkey, totaling about $7.2 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also said goodbye to its stock, about $0.6 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to NIC Inc. (NASDAQ:EGOV). We will take a look at Career Education Corp. (NASDAQ:CECO), Rambus Inc. (NASDAQ:RMBS), Xperi Corporation (NASDAQ:XPER), and Brookline Bancorp, Inc. (NASDAQ:BRKL). All of these stocks’ market caps match EGOV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CECO | 22 | 180484 | 0 |
| RMBS | 17 | 137582 | 4 |
| XPER | 23 | 119653 | 8 |
| BRKL | 9 | 52358 | -1 |
| Average | 17.75 | 122519 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $95 million in EGOV’s case. Xperi Corporation (NASDAQ:XPER) is the most popular stock in this table. On the other hand Brookline Bancorp, Inc. (NASDAQ:BRKL) is the least popular one with only 9 bullish hedge fund positions. NIC Inc. (NASDAQ:EGOV) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately EGOV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EGOV were disappointed as the stock returned -6.4% during the same 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
