NMI Holdings Inc (NMIH) Attracting the Attention of Smart Money

The worries about the economic slowdown in China and the ongoing uncertainty about the path of interest-rate increases triggered several waves of equity sell-offs during the third quarter. Of course, most hedge funds and other asset managers had to stomach substantial losses during the bloody three-month period, which might have caused some to consider fleeing the U.S. equity markets. Interestingly, smaller-cap stocks registered higher losses than large-capitalization stocks during the September quarter, suggesting that institutional investors heavily discarded seemingly riskier equities amid high uncertainty and turmoil. In fact, the Russell 2000 Index lost 11.9% in the third quarter, while the Standard and Poor’s 500 benchmark declined a mere 6.4%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards NMI Holdings Inc (NASDAQ:NMIH).

Is NMI Holdings Inc (NASDAQ:NMIH) a bargain? Investors who are in the know are becoming more confident. The number of long hedge fund bets advanced by 4 lately. 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 Trevena Inc (NASDAQ:TRVN), Sabine Royalty Trust (NYSE:SBR), and Neuroderm Ltd (NASDAQ:NDRM) to gather more data points.

In today’s marketplace there are several signals stock traders have at their disposal to evaluate stocks. A pair of the less known signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outpace the market by a solid amount (see the details here).

Now, let’s take a peek at the new action surrounding NMI Holdings Inc (NASDAQ:NMIH).

What have hedge funds been doing with NMI Holdings Inc (NASDAQ:NMIH)?

Heading into Q4, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a gain of 20% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or had already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Hayman Advisors, managed by Kyle Bass, holds the largest position in NMI Holdings Inc (NASDAQ:NMIH). Hayman Advisors has a $56 million position in the stock, comprising 25.9% of its 13F portfolio. The second-largest stake is held by Oaktree Capital Management, led by Howard Marks, holding a $41.6 million position; 0.5% of its 13F portfolio is allocated to the company. Other peers with similar optimism comprise John Khoury’s Long Pond Capital, Brian Riano, John Eckerson, Sean Fahey and Albert Marino’s Claren Road Asset Management, and Paul Orlin and Alex Porter’s Amici Capital.

With general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Serengeti Asset Management, managed by Jody LaNasa and Vivian Lau, assembled the largest position in NMI Holdings Inc (NASDAQ:NMIH). Serengeti Asset Management had $1.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $1.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Peter Muller’s PDT Partners, and Chuck Royce’s Royce & Associates.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NMI Holdings Inc (NASDAQ:NMIH) but similarly valued. These stocks are Trevena Inc (NASDAQ:TRVN), Sabine Royalty Trust (NYSE:SBR), Neuroderm Ltd (NASDAQ:NDRM), and Douglas Dynamics Inc (NYSE:PLOW). All of these stocks’ market caps match NMI Holdings Inc’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $236 million in NMI Holdings Inc’s case. Trevena Inc (NASDAQ:TRVN) is the most popular stock in this table. On the other hand Sabine Royalty Trust (NYSE:SBR) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks NMI Holdings Inc (NASDAQ:NMIH) is more popular among hedge funds and has quite a bit more money invested in it. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.