Is Nelnet, Inc. (NNI) A Good Stock To Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Nelnet, Inc. (NYSE:NNI) investors should be aware of a decrease in support from the world’s most successful money managers lately. NNI was in 9 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with NNI positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Herman Miller, Inc. (NASDAQ:MLHR), Sohu.com Inc (NASDAQ:SOHU), and Alexander & Baldwin Holdings Inc (NYSE:MATX) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, we’re going to take a gander at the fresh action surrounding Nelnet, Inc. (NYSE:NNI).

Hedge fund activity in Nelnet, Inc. (NYSE:NNI)

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in NNI at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Joe Huber’s Huber Capital Management has the most valuable position in Nelnet, Inc. (NYSE:NNI), worth close to $15.2 million, corresponding to 0.6% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, one of the biggest hedge funds in the world, which holds a $14.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Cliff Asness’s AQR Capital Management and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Seeing as Nelnet, Inc. (NYSE:NNI) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies that slashed their entire stakes in the third quarter. Interestingly, Israel Englander’s Millennium Management dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $1.5 million in stock, and Porter Collins, Daniel Moses, and Vincent Daniel’s Seawolf Capital was right behind this move, as the fund dropped about $1.1 million worth of shares.

Let’s also examine hedge fund activity in other stocks similar to Nelnet, Inc. (NYSE:NNI). We will take a look at Herman Miller, Inc. (NASDAQ:MLHR), Sohu.com Inc (NASDAQ:SOHU), Alexander & Baldwin Holdings Inc (NYSE:MATX), and Cooper-Standard Holdings Inc (NYSE:CPS). This group of stocks’ market valuations are similar to NNI’s market valuation.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $52 million in NNI’s case. Cooper-Standard Holdings Inc (NYSE:CPS) is the most popular stock in this table. On the other hand Alexander & Baldwin Holdings Inc (NYSE:MATX) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Nelnet, Inc. (NYSE:NNI) is even less popular than MATX. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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