Should I Avoid Nutrien Ltd. (NTR)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Nutrien Ltd. (NYSE:NTR).

Is Nutrien Ltd. (NYSE:NTR) an outstanding investment today? Prominent investors were selling. The number of long hedge fund positions dropped by 5 lately. Nutrien Ltd. (NYSE:NTR) was in 28 hedge funds’ portfolios at the end of June. The all time high for this statistic is 35. Our calculations also showed that NTR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 33 hedge funds in our database with NTR positions at the end of the first quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 79 percentage points since March 2017 (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.

Noam Gottesman of GLG Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a peek at the latest hedge fund action encompassing Nutrien Ltd. (NYSE:NTR).

Do Hedge Funds Think NTR Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NTR over the last 24 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in Nutrien Ltd. (NYSE:NTR) was held by Citadel Investment Group, which reported holding $138.2 million worth of stock at the end of June. It was followed by Adage Capital Management with a $127.3 million position. Other investors bullish on the company included Galibier Capital Management, Point72 Asset Management, and GLG Partners. In terms of the portfolio weights assigned to each position Moerus Capital Management allocated the biggest weight to Nutrien Ltd. (NYSE:NTR), around 13.75% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, dishing out 9.5 percent of its 13F equity portfolio to NTR.

Because Nutrien Ltd. (NYSE:NTR) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers that decided to sell off their full holdings heading into Q3. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $458.6 million in stock, and Jeff Ubben’s Inclusive Capital was right behind this move, as the fund sold off about $12.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Nutrien Ltd. (NYSE:NTR). These stocks are KKR & Co Inc. (NYSE:KKR), LyondellBasell Industries NV (NYSE:LYB), Yum! Brands, Inc. (NYSE:YUM), Archer Daniels Midland Company (NYSE:ADM), Hilton Worldwide Holdings Inc (NYSE:HLT), Zimmer Biomet Holdings Inc (NYSE:ZBH), and Rockwell Automation Inc. (NYSE:ROK). This group of stocks’ market caps are similar to NTR’s market cap.

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As you can see these stocks had an average of 41.3 hedge funds with bullish positions and the average amount invested in these stocks was $2087 million. That figure was $597 million in NTR’s case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. On the other hand Rockwell Automation Inc. (NYSE:ROK) is the least popular one with only 25 bullish hedge fund positions. Nutrien Ltd. (NYSE:NTR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NTR is 29.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on NTR as the stock returned 18.4% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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