We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like National Bank Holdings Corporation (NYSE:NBHC).
National Bank Holdings Corporation (NYSE:NBHC) was in 11 hedge funds’ portfolios at the end of the third quarter of 2019. NBHC has experienced an increase in hedge fund interest in recent months. There were 10 hedge funds in our database with NBHC holdings at the end of the previous quarter. Our calculations also showed that NBHC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action surrounding National Bank Holdings Corporation (NYSE:NBHC).
What have hedge funds been doing with National Bank Holdings Corporation (NYSE:NBHC)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NBHC over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the biggest position in National Bank Holdings Corporation (NYSE:NBHC), worth close to $52.9 million, amounting to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Elizabeth Park Capital Management, managed by Fred Cummings, which holds a $11.9 million position; 4.7% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions consist of Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to National Bank Holdings Corporation (NYSE:NBHC), around 4.68% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.09 percent of its 13F equity portfolio to NBHC.
As one would reasonably expect, some big names have been driving this bullishness. PDT Partners, managed by Peter Muller, created the largest position in National Bank Holdings Corporation (NYSE:NBHC). PDT Partners had $0.5 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.5 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as National Bank Holdings Corporation (NYSE:NBHC) but similarly valued. These stocks are K12 Inc. (NYSE:LRN), Hess Midstream Partners LP (NYSE:HESM), SecureWorks Corp. (NASDAQ:SCWX), and Bitauto Holdings Limited (NYSE:BITA). This group of stocks’ market caps resemble NBHC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LRN | 17 | 133604 | -5 |
| HESM | 7 | 9217 | 1 |
| SCWX | 9 | 18937 | 0 |
| BITA | 13 | 72639 | 6 |
| Average | 11.5 | 58599 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $79 million in NBHC’s case. K12 Inc. (NYSE:LRN) is the most popular stock in this table. On the other hand Hess Midstream Partners LP (NYSE:HESM) is the least popular one with only 7 bullish hedge fund positions. National Bank Holdings Corporation (NYSE:NBHC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on NBHC, though not to the same extent, as the stock returned 6% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
