We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether nVent Electric plc (NYSE:NVT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is nVent Electric plc (NYSE:NVT) a healthy stock for your portfolio? The best stock pickers are getting more optimistic. The number of long hedge fund bets increased by 5 lately. Our calculations also showed that NVT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). NVT was in 28 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 23 hedge funds in our database with NVT positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Nelson Peltz of Trian Partners
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the new hedge fund action regarding nVent Electric plc (NYSE:NVT).
How are hedge funds trading nVent Electric plc (NYSE:NVT)?
At Q4’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in NVT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Nelson Peltz’s Trian Partners has the biggest position in nVent Electric plc (NYSE:NVT), worth close to $346.7 million, comprising 3.7% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which holds a $52.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of Israel Englander’s Millennium Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to nVent Electric plc (NYSE:NVT), around 3.66% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, setting aside 0.99 percent of its 13F equity portfolio to NVT.
Now, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, created the most valuable position in nVent Electric plc (NYSE:NVT). Balyasny Asset Management had $38.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $20 million investment in the stock during the quarter. The following funds were also among the new NVT investors: Gregg Moskowitz’s Interval Partners, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Louis Bacon’s Moore Global Investments.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as nVent Electric plc (NYSE:NVT) but similarly valued. These stocks are CIT Group Inc. (NYSE:CIT), KBR, Inc. (NYSE:KBR), Sabra Health Care REIT Inc (NASDAQ:SBRA), and Philippine Long Distance Telephone (NYSE:PHI). This group of stocks’ market caps match NVT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CIT | 35 | 956120 | 6 |
| KBR | 29 | 515428 | -2 |
| SBRA | 27 | 307485 | 15 |
| PHI | 7 | 75067 | 2 |
| Average | 24.5 | 463525 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $464 million. That figure was $729 million in NVT’s case. CIT Group Inc. (NYSE:CIT) is the most popular stock in this table. On the other hand Philippine Long Distance Telephone (NYSE:PHI) is the least popular one with only 7 bullish hedge fund positions. nVent Electric plc (NYSE:NVT) 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. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately NVT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NVT were disappointed as the stock returned -36.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
