Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Nasdaq, Inc. (NASDAQ:NDAQ) to find out whether there were any major changes in hedge funds’ views.
Is NDAQ a good stock to buy? Hedge funds were getting more bullish. The number of bullish hedge fund positions inched up by 7 recently. Nasdaq, Inc. (NASDAQ:NDAQ) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NDAQ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 25 hedge funds in our database with NDAQ positions at the end of the second quarter.
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to go over the latest hedge fund action surrounding Nasdaq, Inc. (NASDAQ:NDAQ).
Do Hedge Funds Think NDAQ Is A Good Stock To Buy Now?
At third quarter’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NDAQ over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Nasdaq, Inc. (NASDAQ:NDAQ) was held by Two Sigma Advisors, which reported holding $70.4 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $21.7 million position. Other investors bullish on the company included Renaissance Technologies, GLG Partners, and Adage Capital Management. In terms of the portfolio weights assigned to each position BlueMar Capital Management allocated the biggest weight to Nasdaq, Inc. (NASDAQ:NDAQ), around 1.23% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, dishing out 0.9 percent of its 13F equity portfolio to NDAQ.
Consequently, key money managers have jumped into Nasdaq, Inc. (NASDAQ:NDAQ) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most outsized position in Nasdaq, Inc. (NASDAQ:NDAQ). Arrowstreet Capital had $11 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $2.5 million investment in the stock during the quarter. The following funds were also among the new NDAQ investors: Greg Eisner’s Engineers Gate Manager, Matthew Hulsizer’s PEAK6 Capital Management, and Peter Algert’s Algert Global.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nasdaq, Inc. (NASDAQ:NDAQ) but similarly valued. These stocks are Interactive Brokers Group, Inc. (NASDAQ:IBKR), Rogers Communications Inc. (NYSE:RCI), FleetCor Technologies, Inc. (NYSE:FLT), China Unicom (Hong Kong) Limited (NYSE:CHU), AmerisourceBergen Corporation (NYSE:ABC), Simon Property Group, Inc (NYSE:SPG), and Entergy Corporation (NYSE:ETR). This group of stocks’ market valuations resemble NDAQ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBKR | 28 | 787440 | -4 |
| RCI | 15 | 264156 | -1 |
| FLT | 40 | 1497542 | -13 |
| CHU | 6 | 49582 | -2 |
| ABC | 45 | 477155 | 5 |
| SPG | 25 | 313077 | -2 |
| ETR | 27 | 786556 | -5 |
| Average | 26.6 | 596501 | -3.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $597 million. That figure was $220 million in NDAQ’s case. AmerisourceBergen Corporation (NYSE:ABC) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 6 bullish hedge fund positions. Nasdaq, Inc. (NASDAQ:NDAQ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NDAQ is 73.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately NDAQ wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NDAQ were disappointed as the stock returned 5.2% since the end of September (through 12/18) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
