Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Northwest Pipe Company (NASDAQ:NWPX) to find out whether it was one of their high conviction long-term ideas.
Northwest Pipe Company (NASDAQ:NWPX) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of the third quarter of 2015. 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 Catabasis Pharmaceuticals Inc (NASDAQ:CATB), Shore Bancshares, Inc. (NASDAQ:SHBI), and Farmland Partners Inc (NYSE:FPI) to gather more data points.
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In today’s marketplace, there is a multitude of formulas that investors use to grade publicly traded companies. A pair of the most useful formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite investment managers can outpace the S&P 500 by a superb margin (see the details here).
Now, let’s take a look at the key action surrounding Northwest Pipe Company (NASDAQ:NWPX).
How are hedge funds trading Northwest Pipe Company (NASDAQ:NWPX)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, flat over the last quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund and institutional investor database, Royce & Associates, managed by Chuck Royce, holds the largest position in Northwest Pipe Company (NASDAQ:NWPX). Royce & Associates has a $15.6 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Westerly Capital Management, managed by Jim Tarantino and Chris Galvin, which holds a $1 million position; 1.2% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism comprise D E Shaw, Charles Paquelet’s Skylands Capital, and Renaissance Technologies.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Northwest Pipe Company (NASDAQ:NWPX) but similarly valued. These stocks are Catabasis Pharmaceuticals Inc (NASDAQ:CATB), Shore Bancshares, Inc. (NASDAQ:SHBI), Farmland Partners Inc (NYSE:FPI), and Travelzoo Inc. (NASDAQ:TZOO). This group of stocks’ market values is similar to Northwest Pipe Company (NASDAQ:NWPX)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CATB | 5 | 14272 | -1 |
| SHBI | 6 | 10506 | 0 |
| FPI | 4 | 3121 | 3 |
| TZOO | 11 | 11758 | 1 |
As you can see, these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $19 million in Northwest Pipe Company (NASDAQ:NWPX)’s case. Travelzoo Inc. (NASDAQ:TZOO) is the most popular stock in this table. On the other hand, Farmland Partners Inc (NYSE:FPI) is the least popular one with only 4 bullish hedge fund positions. Northwest Pipe Company (NASDAQ:NWPX) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Travelzoo Inc. (NASDAQ:TZOO) might be a better candidate to consider a long position.
