Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Nomura Holdings, Inc. (NYSE:NMR) investors should be aware of an increase in enthusiasm from smart money recently. Our calculations also showed that NMR isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike this former hedge fund manager 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 take a peek at the fresh hedge fund action regarding Nomura Holdings, Inc. (NYSE:NMR).
How are hedge funds trading Nomura Holdings, Inc. (NYSE:NMR)?
At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in NMR a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, LMR Partners held the most valuable stake in Nomura Holdings, Inc. (NYSE:NMR), which was worth $13.5 million at the end of the second quarter. On the second spot was D E Shaw which amassed $4.3 million worth of shares. Moreover, Fisher Asset Management, Renaissance Technologies, and Citadel Investment Group were also bullish on Nomura Holdings, Inc. (NYSE:NMR), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key money managers have jumped into Nomura Holdings, Inc. (NYSE:NMR) headfirst. Millennium Management, managed by Israel Englander, initiated the biggest position in Nomura Holdings, Inc. (NYSE:NMR). Millennium Management had $0.2 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0.1 million position during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Nomura Holdings, Inc. (NYSE:NMR). These stocks are Alliant Energy Corporation (NASDAQ:LNT), Universal Health Services, Inc. (NYSE:UHS), Masco Corporation (NYSE:MAS), and Duke Realty Corporation (NYSE:DRE). This group of stocks’ market caps resemble NMR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LNT | 26 | 652790 | 9 |
| UHS | 24 | 713982 | -5 |
| MAS | 45 | 1083854 | 5 |
| DRE | 23 | 412696 | 7 |
| Average | 29.5 | 715831 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $716 million. That figure was $23 million in NMR’s case. Masco Corporation (NYSE:MAS) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Nomura Holdings, Inc. (NYSE:NMR) is even less popular than DRE. Hedge funds clearly dropped the ball on NMR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks (see the video below) 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 NMR as the stock returned 19.7% during the third quarter and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
