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. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Neenah Paper, Inc. (NYSE:NP) in this article.
Neenah Paper, Inc. (NYSE:NP) was in 11 hedge funds’ portfolios at the end of December. NP has seen an increase in hedge fund interest lately. There were 8 hedge funds in our database with NP holdings at the end of the previous quarter. Our calculations also showed that NP 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).
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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. Now let’s view the key hedge fund action encompassing Neenah Paper, Inc. (NYSE:NP).
What does smart money think about Neenah Paper, Inc. (NYSE:NP)?
At Q4’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the third quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in NP a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Neenah Paper, Inc. (NYSE:NP), which was worth $8.5 million at the end of the third quarter. On the second spot was Millennium Management which amassed $6.9 million worth of shares. Marshall Wace LLP, Renaissance Technologies, and Royce & Associates were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Neenah Paper, Inc. (NYSE:NP), around 0.02% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to NP.
Consequently, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Neenah Paper, Inc. (NYSE:NP). Marshall Wace LLP had $2.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $1.4 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Benjamin A. Smith’s Laurion Capital Management.
Let’s go over hedge fund activity in other stocks similar to Neenah Paper, Inc. (NYSE:NP). These stocks are Marten Transport, Ltd (NASDAQ:MRTN), First Bancorp (NASDAQ:FBNC), Athenex, Inc. (NASDAQ:ATNX), and Palomar Holdings, Inc. (NASDAQ:PLMR). All of these stocks’ market caps resemble NP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MRTN | 17 | 49426 | -6 |
| FBNC | 14 | 84143 | -2 |
| ATNX | 15 | 359102 | -2 |
| PLMR | 8 | 29547 | -5 |
| Average | 13.5 | 130555 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $28 million in NP’s case. Marten Transport, Ltd (NASDAQ:MRTN) is the most popular stock in this table. On the other hand Palomar Holdings, Inc. (NASDAQ:PLMR) is the least popular one with only 8 bullish hedge fund positions. Neenah Paper, Inc. (NYSE:NP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 NP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NP investors were disappointed as the stock returned -32.6% 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 most of these stocks already outperformed the market in 2020.
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.
