At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards NextDecade Corporation (NASDAQ:NEXT).
Is NextDecade Corporation (NASDAQ:NEXT) the right pick for your portfolio? Money managers are taking a bearish view. The number of bullish hedge fund bets decreased by 2 in recent months. Our calculations also showed that NEXT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
James Dinan of York Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the latest hedge fund action regarding NextDecade Corporation (NASDAQ:NEXT).
What have hedge funds been doing with NextDecade Corporation (NASDAQ:NEXT)?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NEXT over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, York Capital Management held the most valuable stake in NextDecade Corporation (NASDAQ:NEXT), which was worth $108.8 million at the end of the third quarter. On the second spot was Valinor Management LLC which amassed $36.8 million worth of shares. Halcyon Asset Management, Highland Capital Management, and Millennium 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 York Capital Management allocated the biggest weight to NextDecade Corporation (NASDAQ:NEXT), around 6.47% of its 13F portfolio. Halcyon Asset Management is also relatively very bullish on the stock, setting aside 3.88 percent of its 13F equity portfolio to NEXT.
Seeing as NextDecade Corporation (NASDAQ:NEXT) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that slashed their positions entirely last quarter. Interestingly, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital dumped the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth about $0.2 million in stock. Renaissance Technologies, also dropped its stock, about $0.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NextDecade Corporation (NASDAQ:NEXT) but similarly valued. We will take a look at Delek Logistics Partners LP (NYSE:DKL), Franchise Group, Inc. (NASDAQ:FRG), SeaSpine Holdings Corp (NASDAQ:SPNE), and GigCapital2, Inc. (NASDAQ:GIX). This group of stocks’ market valuations are closest to NEXT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DKL | 1 | 687 | -1 |
| FRG | 7 | 33719 | 2 |
| SPNE | 19 | 31741 | 9 |
| GIX | 10 | 42372 | 1 |
| Average | 9.25 | 27130 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $166 million in NEXT’s case. SeaSpine Holdings Corp (NASDAQ:SPNE) is the most popular stock in this table. On the other hand Delek Logistics Partners LP (NYSE:DKL) is the least popular one with only 1 bullish hedge fund positions. NextDecade Corporation (NASDAQ:NEXT) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately NEXT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NEXT investors were disappointed as the stock returned -19.7% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
