How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Nanometrics Incorporated (NASDAQ:NANO).
Is Nanometrics Incorporated (NASDAQ:NANO) worth your attention right now? Investors who are in the know are getting more optimistic. The number of long hedge fund positions improved by 1 lately. Our calculations also showed that NANO 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.
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 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 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 take a peek at the fresh hedge fund action regarding Nanometrics Incorporated (NASDAQ:NANO).
Hedge fund activity in Nanometrics Incorporated (NASDAQ:NANO)
Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in NANO a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies holds the biggest position in Nanometrics Incorporated (NASDAQ:NANO). Renaissance Technologies has a $36.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Fisher Asset Management, led by Ken Fisher, holding a $32.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Chuck Royce’s Royce & Associates, John Overdeck and David Siegel’s Two Sigma Advisors and D. E. Shaw’s D E Shaw.
As aggregate interest increased, specific money managers have jumped into Nanometrics Incorporated (NASDAQ:NANO) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, initiated the largest position in Nanometrics Incorporated (NASDAQ:NANO). Magnetar Capital had $1.1 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $0.9 million investment in the stock during the quarter. The other funds with brand new NANO positions are Charles Davidson and Joseph Jacobs’s Wexford Capital, Minhua Zhang’s Weld Capital Management, and David Harding’s Winton Capital Management.
Let’s now review hedge fund activity in other stocks similar to Nanometrics Incorporated (NASDAQ:NANO). These stocks are Tidewater Inc. (NYSE:TDW), Everi Holdings Inc (NYSE:EVRI), Tenneco Inc (NYSE:TEN), and Seabridge Gold, Inc. (NYSE:SA). This group of stocks’ market valuations resemble NANO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TDW | 15 | 223006 | 0 |
| EVRI | 24 | 272248 | -2 |
| TEN | 12 | 113355 | -14 |
| SA | 9 | 37822 | 1 |
| Average | 15 | 161608 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $118 million in NANO’s case. Everi Holdings Inc (NYSE:EVRI) is the most popular stock in this table. On the other hand Seabridge Gold, Inc. (NYSE:SA) is the least popular one with only 9 bullish hedge fund positions. Nanometrics Incorporated (NASDAQ:NANO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NANO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NANO were disappointed as the stock returned -6% during the third 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
