The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards NMI Holdings Inc (NASDAQ:NMIH), and what that likely means for the prospects of the company and its stock.
NMI Holdings Inc (NASDAQ:NMIH) has experienced an increase in activity from the world’s largest hedge funds lately. NMIH was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 12 hedge funds in our database with NMIH holdings at the end of the previous quarter. Our calculations also showed that nmih isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most stock holders, hedge funds are viewed as slow, old investment tools of years past. While there are greater than 8000 funds in operation at present, Our researchers look at the upper echelon of this group, about 750 funds. These money managers preside over the majority of the smart money’s total asset base, and by keeping track of their matchless stock picks, Insider Monkey has spotted various investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s take a peek at the new hedge fund action encompassing NMI Holdings Inc (NASDAQ:NMIH).
Hedge fund activity in NMI Holdings Inc (NASDAQ:NMIH)
Heading into the first quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the second quarter of 2018. On the other hand, there were a total of 16 hedge funds with a bullish position in NMIH a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Oaktree Capital Management was the largest shareholder of NMI Holdings Inc (NASDAQ:NMIH), with a stake worth $101.4 million reported as of the end of December. Trailing Oaktree Capital Management was Renaissance Technologies, which amassed a stake valued at $35 million. One Tusk Investment Partners, Driehaus Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, specific money managers have jumped into NMI Holdings Inc (NASDAQ:NMIH) headfirst. One Tusk Investment Partners, managed by Vivian Lau, created the most outsized position in NMI Holdings Inc (NASDAQ:NMIH). One Tusk Investment Partners had $9.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $2.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Steve Cohen’s Point72 Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as NMI Holdings Inc (NASDAQ:NMIH) but similarly valued. We will take a look at TPG Specialty Lending Inc (NYSE:TSLX), McDermott International, Inc. (NYSE:MDR), Kite Realty Group Trust (NYSE:KRG), and AtriCure Inc. (NASDAQ:ATRC). This group of stocks’ market caps resemble NMIH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSLX | 10 | 39083 | 0 |
| MDR | 23 | 163462 | -1 |
| KRG | 7 | 25452 | -6 |
| ATRC | 22 | 163677 | 0 |
| Average | 15.5 | 97919 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $165 million in NMIH’s case. McDermott International, Inc. (NYSE:MDR) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 7 bullish hedge fund positions. NMI Holdings Inc (NASDAQ:NMIH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on NMIH as the stock returned 50.3% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
