There are several ways to beat the market, and investing in small-cap stocks has historically been one of them. We like to improve our odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small-cap stocks that big brokerage houses simply don’t cover. Because of Icahn Capital’s and other elite funds’ exemplary historical records, we pay close attention to their small-cap picks. In this article, we use hedge fund filing data to analyze National Grid plc (ADR) (NYSE:NGG).
National Grid plc (ADR) has seen an increase in activity from the world’s largest hedge funds lately, although they still remain very much underweight the stock. 6 investors that we track we long NGG on September 30, up by 1 during the third quarter, while the value of their holdings shot up by 50%, in contrast to the stock’s mere 6% gain during that time. Nonetheless, their $166 million in shares accounted for just 0.30% of the outstanding shares of the $51 billion U.K utilities company.
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 Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG), Texas Instruments Incorporated (NASDAQ:TXN), and BHP Billiton Limited (ADR) (NYSE:BHP) to gather more data points.
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In the financial world there are a multitude of metrics market participants can use to size up publicly traded companies. Some of the most under-the-radar metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best investment managers can outperform the broader indices by a significant amount (see the details here).
With all of this in mind, we’re going to take a peek at the latest action encompassing National Grid plc (ADR) (NYSE:NGG).
What have hedge funds been doing with National Grid plc (ADR) (NYSE:NGG)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a 20% uptick from the previous quarter. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or had already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies holds the number one position in National Grid plc (ADR) (NYSE:NGG). Renaissance Technologies has a $118.1 million position in the stock, comprising 0.3% of its 13F portfolio. The second-largest stake is held by Phill Gross and Robert Atchinson of Adage Capital Management, with a $34.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers that hold long positions consist of Matthew Hulsizer’s PEAK6 Capital Management, Andre F. Perold’s HighVista Strategies, and Ken Griffin’s Citadel Investment Group.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Adage Capital Management initiated the most valuable position in National Grid plc (ADR) (NYSE:NGG). Citadel Investment Group also made a $0.3 million investment in the stock during the quarter.
Let’s also examine hedge fund activity in other stocks similar to National Grid plc (ADR) (NYSE:NGG). These stocks are Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG), Texas Instruments Incorporated (NASDAQ:TXN), BHP Billiton Limited (ADR) (NYSE:BHP), and Time Warner Cable Inc (NYSE:TWC). All of these stocks’ market caps are similar to NGG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMFG | 14 | 35784 | -3 |
| TXN | 35 | 710030 | 2 |
| BHP | 20 | 132412 | 1 |
| TWC | 107 | 16157890 | 2 |
As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $4.26 billion. That figure was $166 million in NGG’s case. Time Warner Cable Inc (NYSE:TWC) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks National Grid plc (ADR) (NYSE:NGG) is even less popular than SMFG. Considering that hedge funds aren’t at all fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.
