How do we determine whether NextPoint Residential Trust Inc (NYSE:NXRT) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is NextPoint Residential Trust Inc (NYSE:NXRT) a buy, sell, or hold? Money managers are in a pessimistic mood. The number of bullish hedge fund positions were cut by one recently, hence at the end of the third quarter, there were only nine investors with long holdings of the stock. Nine bullish hedge funds are far from enough for it to be considered as one of the most popular stocks in recent months. (If you are interested to see which public companies hedge funds have been piling on recently, take a look at the list of 30 most popular stocks among hedge funds in Q3 of 2018). In this article, we are going to examine NextPoint Residential Trust Inc (NYSE:NXRT) in more detail, and try to determine whether the stock is worthy of your portfolio.
In the 21st century investor’s toolkit there are a large number of metrics stock traders use to analyze stocks. A pair of the most underrated metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outperform their index-focused peers by a solid amount (see the details here).
While investigating the stock carefully we stumbled upon Tao Value’s Q3 Letter, in which, among other stocks, this elite value investing club examines NextPoint Residential Trust Inc (NYSE:NXRT) and the company’s latest moves. We bring you that part of the letter:
“As for NexPoint Residential (NXRT), albeit stock’s good performance, there is actually new information impacts our key assumption. As pointed out in last quarter’s letter, I’ve noticed their deal flow in turning over properties got slower compared to past years. There was still no acquisition done this quarter.According to communication with analyst, NXRT has already closed the deal to sell Southpoint Reserve at Stoney Creek (which has been reported as “Held for Sale Property” for 4 quarters), however is stillwaiting for an acquisition to pair it up. Although asset turnover slowdown will heavily impact expected return for a flipper, the “flip” side is that the management appears disciplined and didn’t pay up just for acquisition’s sake.”
In order to make our final call on the stock, we need to gather more data about it, which is why we will now take a glance at the recent hedge fund action towards it.
What have hedge funds been doing with NextPoint Residential Trust Inc (NYSE:NXRT)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in NXRT over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in NextPoint Residential Trust Inc (NYSE:NXRT) was held by Highland Capital Management, which reported holding $68.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $39.5 million position. Other investors bullish on the company included Millennium Management, GLG Partners, and Lyon Street Capital.
Due to the fact that NextPoint Residential Trust Inc (NYSE:NXRT) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds who sold off their full holdings in the third quarter. Interestingly, Emanuel J. Friedman’s EJF Capital cut the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $0.3 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 fund in the third quarter.
Let’s check out hedge fund activity in other stocks similar to NextPoint Residential Trust Inc (NYSE:NXRT). We will take a look at Vantage Energy Acquisition Corp. (NASDAQ:VEAC), Frontier Communications Corporation (NASDAQ:FTR), Cellcom Israel Ltd. (NYSE:CEL), and Cohen & Steers Limited Duration Preferred and Income Fund, Inc. (NYSE:LDP). This group of stocks’ market values are similar to SNY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VEAC | 19 | 317126 | 1 |
| FTR | 20 | 39226 | -3 |
| CEL | 1 | 25278 | -2 |
| LDP | 1 | 410 | 1 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $136 million in NXRT’s case. Frontier Communications Corporation (NASDAQ:FTR) is the most popular stock in this table. On the other hand Cellcom Israel Ltd. (NYSE:CEL) is the least popular one with only 1 bullish hedge fund position. NextPoint Residential Trust Inc (NYSE:NXRT) 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 FTR might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
