Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Hedge fund interest in National Health Investors Inc (NYSE:NHI) shares was flat during the third quarter. This is usually a negative indicator. 10 hedge funds that we track owned the stock on September 30, same as on June 30. At the end of this article we will also compare NHI to other stocks including Fresh Del Monte Produce Inc (NYSE:FDP), Worthington Industries, Inc. (NYSE:WOR), and Science Applications International Corp (NYSE:SAIC) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How have hedgies been trading National Health Investors Inc (NYSE:NHI)?
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards NHI over the last 5 quarters, which has been volatile within a fairly narrow range. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Millennium Management, one of the 10 largest hedge funds in the world, holds the biggest position in National Health Investors Inc (NYSE:NHI). Millennium Management has a $48.4 million position in the stock. On Millennium Management’s heels is John Overdeck and David Siegel of Two Sigma Advisors, which holds a $7.3 million position. Remaining professional money managers that hold long positions include Cliff Asness’ AQR Capital Management, Jim Simons’ Renaissance Technologies, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-micro-cap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually dumped their positions entirely. It’s worth mentioning that Richard Driehaus’ Driehaus Capital dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at about $2.8 million in stock, and George Hall’s Clinton Group was right behind this move, as the fund sold off about $1.9 million worth of shares.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as National Health Investors Inc (NYSE:NHI) but similarly valued. These stocks are Fresh Del Monte Produce Inc (NYSE:FDP), Worthington Industries, Inc. (NYSE:WOR), Science Applications International Corp (NYSE:SAIC), and Sprouts Farmers Market Inc (NASDAQ:SFM). All of these stocks’ market caps resemble NHI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FDP | 18 | 124840 | 0 |
| WOR | 16 | 152481 | -2 |
| SAIC | 15 | 80466 | -1 |
| SFM | 22 | 139941 | 0 |
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $69 million in NHI’s case. Sprouts Farmers Market Inc (NASDAQ:SFM) is the most popular stock in this table. On the other hand Science Applications International Corp (NYSE:SAIC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks National Health Investors Inc (NYSE:NHI) is even less popular than SAIC. Considering that hedge funds aren’t 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.
Disclosure: None
