How do you pick the next stock to invest in? One way would be to spend hours 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 National Vision Holdings, Inc. (NASDAQ:EYE).
Is National Vision Holdings, Inc. (NASDAQ:EYE) a bargain? The best stock pickers are becoming less confident. The number of bullish hedge fund bets shrunk by 2 recently. Our calculations also showed that EYE isn’t among the 30 most popular stocks among hedge funds. EYE was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 17 hedge funds in our database with EYE positions at the end of the previous quarter.
To most stock holders, hedge funds are seen as underperforming, outdated investment tools of yesteryear. While there are greater than 8000 funds trading at the moment, Our researchers hone in on the crème de la crème of this club, approximately 750 funds. Most estimates calculate that this group of people watch over the majority of all hedge funds’ total capital, and by shadowing their matchless equity investments, Insider Monkey has found several investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to take a gander at the new hedge fund action regarding National Vision Holdings, Inc. (NASDAQ:EYE).
How are hedge funds trading National Vision Holdings, Inc. (NASDAQ:EYE)?
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EYE over the last 14 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Adage Capital Management held the most valuable stake in National Vision Holdings, Inc. (NASDAQ:EYE), which was worth $160.9 million at the end of the third quarter. On the second spot was Select Equity Group which amassed $86.4 million worth of shares. Moreover, Element Capital Management, D E Shaw, and Impax Asset Management were also bullish on National Vision Holdings, Inc. (NASDAQ:EYE), allocating a large percentage of their portfolios to this stock.
Due to the fact that National Vision Holdings, Inc. (NASDAQ:EYE) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few hedgies who were dropping their positions entirely last quarter. At the top of the heap, Glenn Russell Dubin’s Highbridge Capital Management cut the biggest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $4.5 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also sold off its stock, about $1.8 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to National Vision Holdings, Inc. (NASDAQ:EYE). These stocks are Myriad Genetics, Inc. (NASDAQ:MYGN), HB Fuller Co (NYSE:FUL), Inovalon Holdings Inc (NASDAQ:INOV), and Cosan Limited (NYSE:CZZ). All of these stocks’ market caps are similar to EYE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MYGN | 19 | 259947 | -2 |
| FUL | 14 | 118109 | 6 |
| INOV | 13 | 26035 | 0 |
| CZZ | 18 | 109958 | 5 |
| Average | 16 | 128512 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $341 million in EYE’s case. Myriad Genetics, Inc. (NASDAQ:MYGN) is the most popular stock in this table. On the other hand Inovalon Holdings Inc (NASDAQ:INOV) is the least popular one with only 13 bullish hedge fund positions. National Vision Holdings, Inc. (NASDAQ:EYE) 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 EYE wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); EYE investors were disappointed as the stock returned 1.3% 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.
