Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we are going to analyze the smart money sentiment towards National Bank Holdings Corp (NYSE:NBHC).
National Bank Holdings Corp (NYSE:NBHC) investors should pay attention to a decrease in hedge fund interest of late. NBHC was in 9 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 12 hedge funds in our database with NBHC positions at the end of the previous quarter. Our calculations also showed that NBHC 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).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to take a gander at the fresh hedge fund action surrounding National Bank Holdings Corp (NYSE:NBHC).
How have hedgies been trading National Bank Holdings Corp (NYSE:NBHC)?
At Q4’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in NBHC over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in National Bank Holdings Corp (NYSE:NBHC), worth close to $52.8 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $15.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism include Fred Cummings’s Elizabeth Park Capital Management, Ken Griffin’s Citadel Investment Group and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to National Bank Holdings Corp (NYSE:NBHC), around 3.87% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to NBHC.
Because National Bank Holdings Corp (NYSE:NBHC) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that decided to sell off their entire stakes heading into Q4. At the top of the heap, Peter Muller’s PDT Partners said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, worth close to $0.5 million in stock. Minhua Zhang’s fund, Weld Capital Management, also dumped its stock, about $0.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to National Bank Holdings Corp (NYSE:NBHC). We will take a look at Transportadora de Gas del Sur SA (NYSE:TGS), Bright Scholar Education Holdings Limited (NYSE:BEDU), Plantronics, Inc. (NYSE:PLT), and United Fire Group, Inc. (NASDAQ:UFCS). This group of stocks’ market values resemble NBHC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TGS | 10 | 24814 | 1 |
| BEDU | 8 | 87125 | -1 |
| PLT | 11 | 44533 | -2 |
| UFCS | 6 | 10537 | -3 |
| Average | 8.75 | 41752 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $84 million in NBHC’s case. Plantronics, Inc. (NYSE:PLT) is the most popular stock in this table. On the other hand United Fire Group, Inc. (NASDAQ:UFCS) is the least popular one with only 6 bullish hedge fund positions. National Bank Holdings Corp (NYSE:NBHC) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately NBHC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NBHC were disappointed as the stock returned -26.9% 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 10 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.
