Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Navios Maritime Holdings Inc. (NYSE:NM).
Is Navios Maritime Holdings Inc. (NYSE:NM) a buy here? Investors who are in the know are taking a bearish view. The number of long hedge fund positions went down by 1 in recent months. Our calculations also showed that NM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). NM was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. There were 5 hedge funds in our database with NM holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of formulas market participants have at their disposal to evaluate their stock investments. A pair of the most under-the-radar formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite fund managers can trounce the broader indices by a healthy amount (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a look at the new hedge fund action encompassing Navios Maritime Holdings Inc. (NYSE:NM).
Hedge fund activity in Navios Maritime Holdings Inc. (NYSE:NM)
Heading into the fourth quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NM over the last 17 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the number one position in Navios Maritime Holdings Inc. (NYSE:NM). Renaissance Technologies has a $3.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Nut Tree Capital, led by Jared Nussbaum, holding a $1.8 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include Peter Muller’s PDT Partners, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Nut Tree Capital allocated the biggest weight to Navios Maritime Holdings Inc. (NYSE:NM), around 0.56% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.0043 percent of its 13F equity portfolio to NM.
Judging by the fact that Navios Maritime Holdings Inc. (NYSE:NM) has faced declining sentiment from the smart money, logic holds that there was a specific group of hedge funds who sold off their full holdings heading into Q4. Intriguingly, Ari Zweiman’s 683 Capital Partners cut the largest position of all the hedgies watched by Insider Monkey, comprising about $0.6 million in call options, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Navios Maritime Holdings Inc. (NYSE:NM). We will take a look at RealNetworks Inc (NASDAQ:RNWK), Cidara Therapeutics Inc (NASDAQ:CDTX), Kezar Life Sciences, Inc. (NASDAQ:KZR), and ARC Document Solutions Inc (NYSE:ARC). This group of stocks’ market caps match NM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RNWK | 6 | 16916 | -1 |
| CDTX | 6 | 11696 | -3 |
| KZR | 8 | 5585 | -2 |
| ARC | 8 | 8213 | 2 |
| Average | 7 | 10603 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $5 million in NM’s case. Kezar Life Sciences, Inc. (NASDAQ:KZR) is the most popular stock in this table. On the other hand RealNetworks Inc (NASDAQ:RNWK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Navios Maritime Holdings Inc. (NYSE:NM) is even less popular than RNWK. Hedge funds dodged a bullet by taking a bearish stance towards NM. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NM investors were disappointed as the stock returned 1.9% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
