Is Nucor Corporation (NUE) a Good Buy?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Nucor Corporation (NYSE:NUE).

Nucor Corporation (NYSE:NUE) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. At the end of this article we will also compare NUE to other stocks including Spectra Energy Partners, LP (NYSE:SEP), Liberty Media Corp (NASDAQ:LMCA), and Tesoro Corporation (NYSE:TSO) to get a better sense of its popularity.

Now, we’re going to review the key action encompassing Nucor Corporation (NYSE:NUE).

How are hedge funds trading Nucor Corporation (NYSE:NUE)?

At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Overdeck and David Siegel’s Two Sigma Advisors has the number one position in Nucor Corporation (NYSE:NUE), worth close to $50.2 million, comprising 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Point72 Asset Management, managed by Steve Cohen, which holds a $40 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism consist of Israel Englander’s Millennium Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Dmitry Balyasny’s Balyasny Asset Management.

Consequently, key money managers were leading the bulls’ herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in Nucor Corporation (NYSE:NUE). Two Sigma Advisors had $50.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $11.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Jacob Gottlieb’s Visium Asset Management, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Peter Muller’s PDT Partners.

Let’s now take a look at hedge fund activity in other stocks similar to Nucor Corporation (NYSE:NUE). These stocks are Spectra Energy Partners, LP (NYSE:SEP), Liberty Media Corp (NASDAQ:LMCA), Tesoro Corporation (NYSE:TSO), and Regions Financial Corporation (NYSE:RF). All of these stocks’ market caps resemble NUE’s market cap.

As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $1,098 million. That figure was $246 million in NUE’s case. Tesoro Corporation (NYSE:TSO) is the most popular stock in this table. On the other hand Spectra Energy Partners, LP (NYSE:SEP) is the least popular one with only 11 bullish hedge fund positions. Nucor Corporation (NYSE:NUE) 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 TSO might be a better candidate to consider a long position.