Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards National Health Investors Inc (NYSE:NHI) to find out whether it was one of their high conviction long-term ideas.
Is National Health Investors Inc (NYSE:NHI) the right investment to pursue these days? Investors who are in the know are becoming hopeful. The number of long hedge fund positions moved up by 3 recently. Our calculations also showed that nhi isn’t among the 30 most popular stocks among hedge funds. NHI was in 13 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 10 hedge funds in our database with NHI positions at the end of the previous quarter.
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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
Let’s take a peek at the key hedge fund action regarding National Health Investors Inc (NYSE:NHI).
How are hedge funds trading National Health Investors Inc (NYSE:NHI)?
Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NHI over the last 14 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in National Health Investors Inc (NYSE:NHI), which was worth $72.2 million at the end of the third quarter. On the second spot was Millennium Management which amassed $9.9 million worth of shares. Moreover, Two Sigma Advisors, PEAK6 Capital Management, and AQR Capital Management were also bullish on National Health Investors Inc (NYSE:NHI), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds were breaking ground themselves. D E Shaw, managed by D. E. Shaw, initiated the largest position in National Health Investors Inc (NYSE:NHI). D E Shaw had $0.7 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Noam Gottesman’s GLG Partners, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks similar to National Health Investors Inc (NYSE:NHI). These stocks are Two Harbors Investment Corp (NYSE:TWO), Weingarten Realty Investors (NYSE:WRI), Pluralsight, Inc. (NASDAQ:PS), and Paylocity Holding Corp (NASDAQ:PCTY). This group of stocks’ market caps match NHI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TWO | 16 | 44988 | 2 |
| WRI | 12 | 46342 | 1 |
| PS | 15 | 92526 | 2 |
| PCTY | 14 | 106409 | -8 |
| Average | 14.25 | 72566 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $99 million in NHI’s case. Two Harbors Investment Corp (NYSE:TWO) is the most popular stock in this table. On the other hand Weingarten Realty Investors (NYSE:WRI) is the least popular one with only 12 bullish hedge fund positions. National Health Investors Inc (NYSE:NHI) 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 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. Unfortunately NHI wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); NHI investors were disappointed as the stock returned -0.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
