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 National Instruments Corporation (NASDAQ:NATI).
Hedge fund interest in National Instruments Corporation (NASDAQ:NATI) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare NATI to other stocks including Hanesbrands Inc. (NYSE:HBI), Curtiss-Wright Corp. (NYSE:CW), and Cousins Properties Incorporated (NYSE:CUZ) to get a better sense of its popularity.
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.
Kevin Oram of Praesidium Investment Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the new hedge fund action encompassing National Instruments Corporation (NASDAQ:NATI).
What have hedge funds been doing with National Instruments Corporation (NASDAQ:NATI)?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NATI over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in National Instruments Corporation (NASDAQ:NATI). Royce & Associates has a $70.8 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is Brian Bares of Bares Capital Management, with a $59.2 million position; 1.8% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions encompass Kevin Oram and Peter Uddo’s Praesidium Investment Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Praesidium Investment Management allocated the biggest weight to National Instruments Corporation (NASDAQ:NATI), around 3.22% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, designating 1.78 percent of its 13F equity portfolio to NATI.
Due to the fact that National Instruments Corporation (NASDAQ:NATI) has experienced bearish sentiment from the smart money, we can see that there was a specific group of hedge funds that elected to cut their full holdings last quarter. At the top of the heap, Renaissance Technologies sold off the largest position of the 750 funds monitored by Insider Monkey, totaling close to $9.8 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace was right behind this move, as the fund said goodbye to about $5.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as National Instruments Corporation (NASDAQ:NATI) but similarly valued. We will take a look at Hanesbrands Inc. (NYSE:HBI), Curtiss-Wright Corp. (NYSE:CW), Cousins Properties Incorporated (NYSE:CUZ), and Jefferies Financial Group Inc. (NYSE:JEF). This group of stocks’ market caps are closest to NATI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HBI | 32 | 672396 | 10 |
| CW | 20 | 391825 | 1 |
| CUZ | 18 | 185225 | -4 |
| JEF | 31 | 627544 | -3 |
| Average | 25.25 | 469248 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $469 million. That figure was $311 million in NATI’s case. Hanesbrands Inc. (NYSE:HBI) is the most popular stock in this table. On the other hand Cousins Properties Incorporated (NYSE:CUZ) is the least popular one with only 18 bullish hedge fund positions. National Instruments Corporation (NASDAQ:NATI) 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 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 NATI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NATI investors were disappointed as the stock returned 0.9% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
