The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider New Mountain Finance Corp. (NYSE:NMFC) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
New Mountain Finance Corp. (NYSE:NMFC) shareholders have witnessed an increase in hedge fund interest lately. Our calculations also showed that NMFC 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.
In the eyes of most market participants, hedge funds are perceived as unimportant, old investment tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our experts choose to focus on the leaders of this club, about 750 funds. It is estimated that this group of investors have their hands on the lion’s share of all hedge funds’ total capital, and by keeping an eye on their highest performing stock picks, Insider Monkey has unearthed a few investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Israel Englander of Millennium Management
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. Let’s view the key hedge fund action regarding New Mountain Finance Corp. (NYSE:NMFC).
Hedge fund activity in New Mountain Finance Corp. (NYSE:NMFC)
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NMFC over the last 17 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of New Mountain Finance Corp. (NYSE:NMFC), with a stake worth $17.5 million reported as of the end of September. Trailing Arrowstreet Capital was Millennium Management, which amassed a stake valued at $6.8 million. Polar Capital, Chilton Investment Company, and McKinley 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 P.A.W. Capital Partners allocated the biggest weight to New Mountain Finance Corp. (NYSE:NMFC), around 0.51% of its 13F portfolio. McKinley Capital Management is also relatively very bullish on the stock, earmarking 0.23 percent of its 13F equity portfolio to NMFC.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, established the most valuable position in New Mountain Finance Corp. (NYSE:NMFC). Two Sigma Advisors had $1.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $0.5 million position during the quarter. The other funds with brand new NMFC positions are Dmitry Balyasny’s Balyasny Asset Management 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 New Mountain Finance Corp. (NYSE:NMFC) but similarly valued. We will take a look at Radius Health Inc (NASDAQ:RDUS), Compass Diversified Holdings (NYSE:CODI), Brookline Bancorp, Inc. (NASDAQ:BRKL), and Enanta Pharmaceuticals Inc (NASDAQ:ENTA). All of these stocks’ market caps match NMFC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDUS | 18 | 268579 | 2 |
| CODI | 5 | 4549 | 0 |
| BRKL | 11 | 59263 | 3 |
| ENTA | 16 | 200896 | -4 |
| Average | 12.5 | 133322 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $41 million in NMFC’s case. Radius Health Inc (NASDAQ:RDUS) is the most popular stock in this table. On the other hand Compass Diversified Holdings (NYSE:CODI) is the least popular one with only 5 bullish hedge fund positions. New Mountain Finance Corp. (NYSE:NMFC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NMFC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NMFC were disappointed as the stock returned -1% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
