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 Northwest Pipe Company (NASDAQ:NWPX).
Northwest Pipe Company (NASDAQ:NWPX) was in 11 hedge funds’ portfolios at the end of September. NWPX shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. There were 10 hedge funds in our database with NWPX holdings at the end of the previous quarter. Our calculations also showed that NWPX 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
Chuck Royce of Royce & Associates
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 review the latest hedge fund action encompassing Northwest Pipe Company (NASDAQ:NWPX).
How are hedge funds trading Northwest Pipe Company (NASDAQ:NWPX)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NWPX over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Northwest Pipe Company (NASDAQ:NWPX) was held by Royce & Associates, which reported holding $27.2 million worth of stock at the end of September. It was followed by Fairfax Financial Holdings with a $3.8 million position. Other investors bullish on the company included D E Shaw, Renaissance Technologies, and SG Capital Management. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Northwest Pipe Company (NASDAQ:NWPX), around 0.25% of its 13F portfolio. Fairfax Financial Holdings is also relatively very bullish on the stock, dishing out 0.18 percent of its 13F equity portfolio to NWPX.
Now, key money managers were leading the bulls’ herd. Winton Capital Management, managed by David Harding, created the largest position in Northwest Pipe Company (NASDAQ:NWPX). Winton Capital Management had $0.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.4 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to Northwest Pipe Company (NASDAQ:NWPX). We will take a look at Twelve Seas Investment Company (NASDAQ:BROG), Reading International, Inc. (NASDAQ:RDI), Forty Seven, Inc. (NASDAQ:FTSV), and The Lovesac Company (NASDAQ:LOVE). This group of stocks’ market values match NWPX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BROG | 8 | 17206 | -3 |
| RDI | 7 | 17875 | 1 |
| FTSV | 9 | 34213 | 2 |
| LOVE | 12 | 35995 | 2 |
| Average | 9 | 26322 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $38 million in NWPX’s case. The Lovesac Company (NASDAQ:LOVE) is the most popular stock in this table. On the other hand Reading International, Inc. (NASDAQ:RDI) is the least popular one with only 7 bullish hedge fund positions. Northwest Pipe Company (NASDAQ:NWPX) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on NWPX as the stock returned 22% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
