Hedge Funds Steering Clear of Nova Measuring Instruments Ltd. (NVMI)

The worries about the economic slowdown in China and the ongoing uncertainty about the path of interest-rate increases triggered several waves of equity sell-offs during the third quarter. Of course, most hedge funds and other asset managers had to stomach substantial losses during the bloody three-month period, which might have caused some to consider fleeing the U.S. equity markets. Interestingly, smaller-cap stocks registered higher losses than large-capitalization stocks during the September quarter, suggesting that institutional investors heavily discarded seemingly riskier equities amid high uncertainty and turmoil. In fact, the Russell 2000 Index lost 11.9% in the third quarter, while the Standard and Poor’s 500 benchmark declined by a mere 6.4%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Nova Measuring Instruments Ltd. (NASDAQ:NVMI).

Is Nova Measuring Instruments Ltd. (NASDAQ:NVMI) a buy? The smart money is selling. The number of bullish hedge fund bets fell by 1 recently. At the end of this article we will also compare Nova Measuring Instruments Ltd. to other stocks including Pacific Drilling SA (NYSE:PACD), Antares Pharma Inc (NASDAQ:ATRS), and Harmony Gold Mining Co. (ADR) (NYSE:HMY) to get a better sense of its popularity.

To most investors, hedge funds are perceived as underperforming, outdated financial tools of yesteryear. While there are more than 8,000 funds in operation today, our experts hone in on the masters of this club, around 700 funds. It is estimated that this group of investors watch over bulk of all hedge funds’ total capital, and by tailing their first-class investments, Insider Monkey has brought to light various investment strategies that have historically surpassed the market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, let’s take a look at the fresh action regarding Nova Measuring Instruments Ltd. (NASDAQ:NVMI).

What have hedge funds been doing with Nova Measuring Instruments Ltd. (NASDAQ:NVMI)?

Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 13% fall from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes substantially (or had already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies holds the biggest position in Nova Measuring Instruments Ltd. (NASDAQ:NVMI). Renaissance Technologies has a $17.4 million position in the stock, comprising less than 0.1% of its 13F portfolio. On Renaissance Technologies’ heels is Chuck Royce of Royce & Associates, with a $1.8 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions comprise Richard Mashaal’s Rima Senvest Management, D E Shaw, and John Overdeck and David Siegel’s Two Sigma Advisors.

Judging by the fact that Nova Measuring Instruments Ltd. (NASDAQ:NVMI) has experienced declining sentiment from the smart money, it’s easy to see that there exists a select few fund managers who sold off their positions entirely by the end of the third quarter. Interestingly, Richard Driehaus’ Driehaus Capital said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $2.7 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dumped its stock, about $0.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 fund by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Nova Measuring Instruments Ltd. (NASDAQ:NVMI) but similarly valued. We will take a look at Pacific Drilling SA (NYSE:PACD), Antares Pharma Inc (NASDAQ:ATRS), Harmony Gold Mining Co. (ADR) (NYSE:HMY), and Terraping 3 Acquisition Corp (NASDAQ:TRTL). This group of stocks’ market valuations are similar to Nova Measuring Instruments Ltd.’s market valuation.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $21 million in Nova Measuring Instruments Ltd.’s case. Antares Pharma Inc (NASDAQ:ATRS) is the most popular stock in this table. On the other hand Pacific Drilling SA (NYSE:PACD) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Nova Measuring Instruments Ltd. (NASDAQ:NVMI) is even less popular than Pacific Drilling and Harmony Gold Mining. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.