Is NSC A Good Stock To Buy Now?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Norfolk Southern Corp. (NYSE:NSC).

Is NSC a good stock to buy now? Norfolk Southern Corp. (NYSE:NSC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 47 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that NSC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare NSC to other stocks including General Electric Company (NYSE:GE), Moody’s Corporation (NYSE:MCO), and America Movil SAB de CV (NYSE:AMX) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Phillip Gross of Adage Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to review the latest hedge fund action regarding Norfolk Southern Corp. (NYSE:NSC).

Do Hedge Funds Think NSC Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 50 hedge funds with a bullish position in NSC a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the biggest position in Norfolk Southern Corp. (NYSE:NSC), worth close to $120.2 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Alexander Mitchell of Scopus Asset Management, with a $81.4 million position; 1.6% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, Alex Snow’s Lansdowne Partners and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Key Square Capital Management allocated the biggest weight to Norfolk Southern Corp. (NYSE:NSC), around 7.72% of its 13F portfolio. Thames Capital Management is also relatively very bullish on the stock, dishing out 3.09 percent of its 13F equity portfolio to NSC.

Seeing as Norfolk Southern Corp. (NYSE:NSC) has witnessed bearish sentiment from the smart money, it’s safe to say that there were a few fund managers who sold off their entire stakes by the end of the third quarter. It’s worth mentioning that Aaron Cowen’s Suvretta Capital Management sold off the largest position of all the hedgies tracked by Insider Monkey, comprising close to $70.3 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $69.1 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Norfolk Southern Corp. (NYSE:NSC) but similarly valued. These stocks are General Electric Company (NYSE:GE), Moody’s Corporation (NYSE:MCO), America Movil SAB de CV (NYSE:AMX), Applied Materials, Inc. (NASDAQ:AMAT), Vale SA (NYSE:VALE), ABB Ltd (NYSE:ABB), and U.S. Bancorp (NYSE:USB). All of these stocks’ market caps are similar to NSC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.3 hedge funds with bullish positions and the average amount invested in these stocks was $3582 million. That figure was $715 million in NSC’s case. Moody’s Corporation (NYSE:MCO) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 13 bullish hedge fund positions. Norfolk Southern Corp. (NYSE:NSC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NSC is 67.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on NSC as the stock returned 12% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.