Was The Smart Money Right About Norfolk Southern (NSC)?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Norfolk Southern Corp. (NYSE:NSC).

Norfolk Southern Corp. (NYSE:NSC) has seen a decrease in hedge fund interest lately. Norfolk Southern Corp. (NYSE:NSC) was in 44 hedge funds’ portfolios at the end of December. The all time high for this statistic is 54. Our calculations also showed that NSC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Tom Gayner of Markel Gayner Asset Management

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

At the end of the fourth quarter, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NSC over the last 22 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in Norfolk Southern Corp. (NYSE:NSC), which was worth $136 million at the end of the fourth quarter. On the second spot was Adage Capital Management which amassed $105.2 million worth of shares. Markel Gayner Asset Management, Lansdowne Partners, and GLG Partners 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 Alight Capital allocated the biggest weight to Norfolk Southern Corp. (NYSE:NSC), around 3.22% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, setting aside 3.02 percent of its 13F equity portfolio to NSC.

Since Norfolk Southern Corp. (NYSE:NSC) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies who sold off their full holdings last quarter. It’s worth mentioning that Jack Woodruff’s Candlestick Capital Management dropped the biggest stake of all the hedgies tracked by Insider Monkey, worth close to $37.4 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund said goodbye to about $25.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Norfolk Southern Corp. (NYSE:NSC) but similarly valued. These stocks are Spotify Technology S.A. (NYSE:SPOT), General Motors Company (NYSE:GM), Marsh & McLennan Companies, Inc. (NYSE:MMC), VMware, Inc. (NYSE:VMW), Atlassian Corporation Plc (NASDAQ:TEAM), The Progressive Corporation (NYSE:PGR), and Ferrari N.V. (NYSE:RACE). All of these stocks’ market caps resemble NSC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.9 hedge funds with bullish positions and the average amount invested in these stocks was $2768 million. That figure was $784 million in NSC’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Ferrari N.V. (NYSE:RACE) is the least popular one with only 29 bullish hedge fund positions. Norfolk Southern Corp. (NYSE:NSC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NSC is 44.7. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on NSC as the stock returned 18% since the end of the fourth quarter (through 4/30) and outperformed the market by an even larger margin.

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