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. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in NextGen Healthcare, Inc. (NASDAQ:NXGN)? The smart money sentiment can provide an answer to this question.
NextGen Healthcare, Inc. (NASDAQ:NXGN) was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. NXGN investors should be aware of an increase in hedge fund sentiment in recent months. There were 13 hedge funds in our database with NXGN positions at the end of the previous quarter. Our calculations also showed that NXGN 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).
Matthew Hulsizer of PEAK6 Capital
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. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding NextGen Healthcare, Inc. (NASDAQ:NXGN).
Hedge fund activity in NextGen Healthcare, Inc. (NASDAQ:NXGN)
At Q4’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NXGN over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in NextGen Healthcare, Inc. (NASDAQ:NXGN), which was worth $9.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $7.2 million worth of shares. D E Shaw, Winton Capital Management, and Millennium Management 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 Zebra Capital Management allocated the biggest weight to NextGen Healthcare, Inc. (NASDAQ:NXGN), around 0.41% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to NXGN.
As aggregate interest increased, key money managers were leading the bulls’ herd. Winton Capital Management, managed by David Harding, established the most outsized position in NextGen Healthcare, Inc. (NASDAQ:NXGN). Winton Capital Management had $0.9 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.5 million position during the quarter. The following funds were also among the new NXGN investors: Noam Gottesman’s GLG Partners, Schonfeld Strategic Advisors, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as NextGen Healthcare, Inc. (NASDAQ:NXGN) but similarly valued. We will take a look at Endo International plc (NASDAQ:ENDP), Renewable Energy Group Inc (NASDAQ:REGI), CNX Midstream Partners LP (NYSE:CNXM), and MSG Networks Inc (NYSE:MSGN). This group of stocks’ market values are similar to NXGN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENDP | 17 | 294280 | -2 |
| REGI | 21 | 222864 | 5 |
| CNXM | 5 | 19604 | -1 |
| MSGN | 28 | 304873 | -6 |
| Average | 17.75 | 210405 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $25 million in NXGN’s case. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 5 bullish hedge fund positions. NextGen Healthcare, Inc. (NASDAQ:NXGN) 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 NXGN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NXGN investors were disappointed as the stock returned -37.8% 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.
