At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards NCR Corporation (NYSE:NCR) at the end of the second quarter and determine whether the smart money was really smart about this stock.
NCR Corporation (NYSE:NCR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 32 hedge funds’ portfolios at the end of the second quarter of 2020. Our calculations also showed that NCR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare NCR to other stocks including Independent Bank Corp (NASDAQ:INDB), Viela Bio, Inc. (NASDAQ:VIE), and Pacira Biosciences Inc (NASDAQ:PCRX) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Glen Kacher of Light Street Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the recent hedge fund action regarding NCR Corporation (NYSE:NCR).
What have hedge funds been doing with NCR Corporation (NYSE:NCR)?
At the end of the second quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NCR over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Light Street Capital held the most valuable stake in NCR Corporation (NYSE:NCR), which was worth $58.5 million at the end of the third quarter. On the second spot was Nitorum Capital which amassed $30.1 million worth of shares. Millennium Management, D E Shaw, and Engaged Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Clearline Capital allocated the biggest weight to NCR Corporation (NYSE:NCR), around 3.52% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, setting aside 2.44 percent of its 13F equity portfolio to NCR.
Judging by the fact that NCR Corporation (NYSE:NCR) has experienced a decline in interest from the smart money, it’s easy to see that there is a sect of hedgies who sold off their positions entirely last quarter. It’s worth mentioning that Ricky Sandler’s Eminence Capital said goodbye to the biggest position of all the hedgies watched by Insider Monkey, totaling close to $16.3 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $3.1 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to NCR Corporation (NYSE:NCR). We will take a look at Independent Bank Corp (NASDAQ:INDB), Viela Bio, Inc. (NASDAQ:VIE), Pacira Biosciences Inc (NASDAQ:PCRX), Vishay Intertechnology (NYSE:VSH), Sensient Technologies Corporation (NYSE:SXT), LGI Homes Inc (NASDAQ:LGIH), and ESCO Technologies Inc. (NYSE:ESE). All of these stocks’ market caps match NCR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INDB | 7 | 10886 | 3 |
| VIE | 8 | 241277 | 2 |
| PCRX | 29 | 553399 | 3 |
| VSH | 28 | 333650 | 5 |
| SXT | 23 | 170066 | 0 |
| LGIH | 22 | 108240 | 8 |
| ESE | 7 | 69080 | -1 |
| Average | 17.7 | 212371 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $212 million. That figure was $196 million in NCR’s case. Pacira Biosciences Inc (NASDAQ:PCRX) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks NCR Corporation (NYSE:NCR) is more popular among hedge funds. Our overall hedge fund sentiment score for NCR is 77.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 23.8% in 2020 through September 14th but still managed to beat the market by 17.6 percentage points. Hedge funds were also right about betting on NCR as the stock returned 20.1% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Ncr Voyix Corp (NYSE:VYX)
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Disclosure: None. This article was originally published at Insider Monkey.
