Norwegian Cruise Line Holdings Ltd (NCLH): Are Hedge Funds Right About This Stock?

Is Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) 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, expert networks, and get tips from industry insiders. They fail miserably sometimes but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 38 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare NCLH to other stocks including Loews Corporation (NYSE:L), Best Buy Co., Inc. (NYSE:BBY), and Agrium Inc. (USA) (NYSE:AGU) to get a better sense of its popularity.

To most stock holders, hedge funds are assumed to be underperforming, outdated financial vehicles of yesteryear. While there are over 8000 funds with their doors open at the moment, We hone in on the aristocrats of this group, about 700 funds. These hedge fund managers handle the majority of the hedge fund industry’s total asset base, and by monitoring their inimitable picks, Insider Monkey has discovered a number of investment strategies that have historically outpaced the broader indices. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, let’s review the recent action surrounding Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH).

How have hedgies been trading Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH)?

At Q3’s end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Roystone Capital Partners, managed by Richard Barrera, holds the most valuable position in Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH). Roystone Capital Partners has an $137.8 million position in the stock, comprising 6.6% of its 13F portfolio. Coming in second is John Armitage of Egerton Capital Limited, with an $118.6 million position; 1.3% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Jacob Doft’s Highline Capital Management, Cliff Asness’s AQR Capital Management and Will Snellings’s Marianas Fund Management.

Because Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedgies who were dropping their entire stakes in the third quarter. Interestingly, Gregg Moskowitz’s Interval Partners sold off the largest stake of the 700 funds followed by Insider Monkey, comprising about $20.7 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund cut about $16.8 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) but similarly valued. These stocks are Loews Corporation (NYSE:L), Best Buy Co., Inc. (NYSE:BBY), Agrium Inc. (USA) (NYSE:AGU), and Fidelity National Financial Inc (NYSE:FNF). This group of stocks’ market values are similar to NCLH’s market value.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $1249 million. That figure was $745 million in NCLH’s case. Fidelity National Financial Inc (NYSE:FNF) is the most popular stock in this table. On the other hand, Loews Corporation (NYSE:L) is the least popular one. Although Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), with 38 bullish hedge fund positions, is not the most popular stock in this group, hedge fund interest is still above average. This may be a positive sign, but still we’d rather spend our time focusing on stocks that hedge funds are collectively most bullish on. In this regard, FNF might represent a better buying opportunity.