We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Navistar International Corp (NYSE:NAV), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Navistar International Corp (NYSE:NAV) undervalued? Hedge funds are in a bullish mood. The number of long hedge fund positions increased by 3 recently. Our calculations also showed that NAV isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mark Rachesky of MHR Fund Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the fresh hedge fund action regarding Navistar International Corp (NYSE:NAV).
How have hedgies been trading Navistar International Corp (NYSE:NAV)?
At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NAV over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Navistar International Corp (NYSE:NAV) was held by Icahn Capital LP, which reported holding $484.2 million worth of stock at the end of September. It was followed by MHR Fund Management with a $469.6 million position. Other investors bullish on the company included GAMCO Investors, Renaissance Technologies, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position MHR Fund Management allocated the biggest weight to Navistar International Corp (NYSE:NAV), around 39.21% of its 13F portfolio. Icahn Capital LP is also relatively very bullish on the stock, earmarking 1.85 percent of its 13F equity portfolio to NAV.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. GAMCO Investors, managed by Mario Gabelli, assembled the most outsized position in Navistar International Corp (NYSE:NAV). GAMCO Investors had $123.4 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $4.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Dmitry Balyasny’s Balyasny Asset Management, and Ray Dalio’s Bridgewater Associates.
Let’s check out hedge fund activity in other stocks similar to Navistar International Corp (NYSE:NAV). These stocks are Washington Federal Inc. (NASDAQ:WAFD), BlackLine, Inc. (NASDAQ:BL), Crocs, Inc. (NASDAQ:CROX), and Retail Properties of America Inc (NYSE:RPAI). This group of stocks’ market values are closest to NAV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WAFD | 19 | 94991 | 2 |
| BL | 17 | 184667 | 0 |
| CROX | 36 | 691240 | 6 |
| RPAI | 21 | 266145 | -4 |
| Average | 23.25 | 309261 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $309 million. That figure was $1172 million in NAV’s case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand BlackLine, Inc. (NASDAQ:BL) is the least popular one with only 17 bullish hedge fund positions. Navistar International Corp (NYSE:NAV) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately NAV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NAV were disappointed as the stock returned -34% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
