Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Northern Trust Corporation (NASDAQ:NTRS) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. NTRS was in 35 hedge funds’ portfolios at the end of the third quarter of 2018. There were 31 hedge funds in our database with NTRS holdings at the end of the previous quarter. Our calculations also showed that NTRS isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a look at the new hedge fund action surrounding Northern Trust Corporation (NASDAQ:NTRS).
What have hedge funds been doing with Northern Trust Corporation (NASDAQ:NTRS)?
Heading into the fourth quarter of 2018, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NTRS over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the biggest position in Northern Trust Corporation (NASDAQ:NTRS), worth close to $195.4 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Ariel Investments, led by John W. Rogers, holding a $178.6 million position; the fund has 2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish include Israel Englander’s Millennium Management, Anand Parekh’s Alyeska Investment Group and Mario Gabelli’s GAMCO Investors.
Consequently, key money managers have jumped into Northern Trust Corporation (NASDAQ:NTRS) headfirst. Stevens Capital Management, managed by Matthew Tewksbury, created the biggest position in Northern Trust Corporation (NASDAQ:NTRS). Stevens Capital Management had $14.7 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also made a $3 million investment in the stock during the quarter. The following funds were also among the new NTRS investors: Martin D. Sass’s MD Sass, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Northern Trust Corporation (NASDAQ:NTRS). These stocks are Atlassian Corporation Plc (NASDAQ:TEAM), KKR & Co Inc. (NYSE:KKR), Agilent Technologies Inc. (NYSE:A), and Stanley Black & Decker, Inc. (NYSE:SWK). This group of stocks’ market caps match NTRS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TEAM | 28 | 1083076 | 7 |
| KKR | 31 | 2764720 | 7 |
| A | 40 | 2814048 | -5 |
| SWK | 27 | 421148 | -5 |
| Average | 31.5 | 1770748 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $1.77 billion. That figure was $1.04 billion in NTRS’s case. Agilent Technologies Inc. (NYSE:A) is the most popular stock in this table. On the other hand Stanley Black & Decker, Inc. (NYSE:SWK) is the least popular one with only 27 bullish hedge fund positions. Northern Trust Corporation (NASDAQ:NTRS) 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. In this regard A might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
