Looking for high-potential stocks? 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 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ 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 NewMarket Corporation (NYSE:NEU) .
Is NewMarket Corporation (NYSE:NEU) an outstanding stock to buy now? Investors who are in the know are really taking an optimistic view. The number of long hedge fund positions that are disclosed in regulatory 13F filings improved by 3 lately. NEU was in 14 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with NEU holdings at the end of the previous quarter. At the end of this article we will also compare NEU to other stocks including H&R Block, Inc. (NYSE:HRB), Nutanix Inc. (NASDAQ:NTNX), and Israel Chemicals Ltd. (NYSE:ICL) to get a better sense of its popularity.
Follow Newmarket Corp (NYSE:NEU)
Follow Newmarket Corp (NYSE:NEU)
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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Keeping this in mind, we’re going to take a peek at the fresh action encompassing NewMarket Corporation (NYSE:NEU).
What have hedge funds been doing with NewMarket Corporation (NYSE:NEU)?
Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, growth of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NEU over the last 5 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s institutional investor database, D E Shaw, one of the biggest hedge funds in the world, holds the most valuable position in NewMarket Corporation (NYSE:NEU). D E Shaw has a $44.5 million position in the stock, comprising 0.1% of its 13F portfolio. On D E Shaw’s heels is Jim Simons’ Renaissance Technologies, holding a $21.3 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions comprise Israel Englander’s Millennium Management, Mario Gabelli’s GAMCO Investors and Cliff Asness’ AQR Capital Management. 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.
As aggregate interest increased, some big names were breaking ground themselves. Clinton Group, led by George Hall, assembled the most outsized position in NewMarket Corporation (NYSE:NEU). Clinton Group had $3.4 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners 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 Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s also examine hedge fund activity in other stocks similar to NewMarket Corporation (NYSE:NEU). We will take a look at H&R Block, Inc. (NYSE:HRB), Nutanix Inc. (NASDAQ:NTNX), Israel Chemicals Ltd. (NYSE:ICL), and Carlyle Group LP (NASDAQ:CG). This group of stocks’ market values are similar to NEU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HRB | 13 | 153650 | -7 |
| NTNX | 35 | 89334 | 35 |
| ICL | 4 | 3555 | 1 |
| CG | 11 | 90845 | 1 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $104 million in NEU’s case. Nutanix Inc. (NASDAQ:NTNX) is the most popular stock in this table. On the other hand Israel Chemicals Ltd. (NYSE:ICL) is the least popular one with only 4 bullish hedge fund positions. NewMarket Corporation (NYSE:NEU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NTNX might be a better candidate to consider taking a long position in.
Disclosure: None
