Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Newmark Group, Inc. (NASDAQ:NMRK), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Newmark Group, Inc. (NASDAQ:NMRK) was in 16 hedge funds’ portfolios at the end of June. NMRK has experienced a decrease in enthusiasm from smart money in recent months. There were 24 hedge funds in our database with NMRK positions at the end of the previous quarter. Our calculations also showed that NMRK isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the new hedge fund action regarding Newmark Group, Inc. (NASDAQ:NMRK).
How have hedgies been trading Newmark Group, Inc. (NASDAQ:NMRK)?
At Q2’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NMRK over the last 16 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, EJF Capital was the largest shareholder of Newmark Group, Inc. (NASDAQ:NMRK), with a stake worth $27.3 million reported as of the end of March. Trailing EJF Capital was Sessa Capital, which amassed a stake valued at $21.2 million. Paulson & Co, Cardinal Capital, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Since Newmark Group, Inc. (NASDAQ:NMRK) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers who sold off their full holdings last quarter. Intriguingly, Usman Waheed’s Strycker View Capital cut the largest position of the “upper crust” of funds watched by Insider Monkey, valued at close to $11.2 million in stock. Cliff Asness’s fund, AQR Capital Management, also dropped its stock, about $3.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Newmark Group, Inc. (NASDAQ:NMRK) but similarly valued. We will take a look at Dril-Quip, Inc. (NYSE:DRQ), Delphi Technologies PLC (NYSE:DLPH), BioTelemetry, Inc. (NASDAQ:BEAT), and Redfin Corporation (NASDAQ:RDFN). This group of stocks’ market valuations match NMRK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRQ | 18 | 158872 | 1 |
| DLPH | 25 | 318872 | 1 |
| BEAT | 16 | 38086 | -5 |
| RDFN | 10 | 179010 | 2 |
| Average | 17.25 | 173710 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $102 million in NMRK’s case. Delphi Technologies PLC (NYSE:DLPH) is the most popular stock in this table. On the other hand Redfin Corporation (NASDAQ:RDFN) is the least popular one with only 10 bullish hedge fund positions. Newmark Group, Inc. (NASDAQ:NMRK) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on NMRK, though not to the same extent, as the stock returned 2.1% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
