“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Insight Enterprises, Inc. (NASDAQ:NSIT) and see how it was affected.
Is Insight Enterprises, Inc. (NASDAQ:NSIT) a buy, sell, or hold? The smart money is becoming less hopeful. The number of bullish hedge fund bets went down by 1 in recent months. Our calculations also showed that NSIT isn’t among the 30 most popular stocks among hedge funds. NSIT was in 21 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 22 hedge funds in our database with NSIT holdings at the end of the previous quarter.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a peek at the new hedge fund action regarding Insight Enterprises, Inc. (NASDAQ:NSIT).
Hedge fund activity in Insight Enterprises, Inc. (NASDAQ:NSIT)
At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2018. On the other hand, there were a total of 16 hedge funds with a bullish position in NSIT a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Insight Enterprises, Inc. (NASDAQ:NSIT), with a stake worth $33.2 million reported as of the end of December. Trailing Pzena Investment Management was Royce & Associates, which amassed a stake valued at $19.5 million. AQR Capital Management, GLG Partners, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Insight Enterprises, Inc. (NASDAQ:NSIT) has experienced falling interest from the smart money, we can see that there lies a certain “tier” of fund managers who sold off their full holdings in the third quarter. Intriguingly, David Brown’s Hawk Ridge Management cut the biggest stake of the 700 funds watched by Insider Monkey, totaling an estimated $11.3 million in stock, and Mike Vranos’s Ellington was right behind this move, as the fund dumped about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Insight Enterprises, Inc. (NASDAQ:NSIT). We will take a look at World Fuel Services Corporation (NYSE:INT), WildHorse Resource Development Corporation (NYSE:WRD), Mueller Water Products, Inc. (NYSE:MWA), and Meritor Inc (NYSE:MTOR). This group of stocks’ market values resemble NSIT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INT | 24 | 73147 | 11 |
| WRD | 18 | 93384 | -2 |
| MWA | 24 | 200932 | 8 |
| MTOR | 20 | 290128 | -4 |
| Average | 21.5 | 164398 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $94 million in NSIT’s case. World Fuel Services Corporation (NYSE:INT) is the most popular stock in this table. On the other hand WildHorse Resource Development Corporation (NYSE:WRD) is the least popular one with only 18 bullish hedge fund positions. Insight Enterprises, Inc. (NASDAQ:NSIT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on NSIT as the stock returned 39.2% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
