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Should I Avoid NCR Corporation (NCR)?

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·6 min read
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In this article you are going to find out whether hedge funds think NCR Corporation (NYSE:NCR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

NCR Corporation (NYSE:NCR) investors should be aware of a decrease in support from the world's most elite money managers of late. NCR Corporation (NYSE:NCR) was in 24 hedge funds' portfolios at the end of March. The all time high for this statistic is 42. There were 32 hedge funds in our database with NCR positions at the end of the fourth quarter. Our calculations also showed that NCR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Glen Kacher of Light Street Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to take a peek at the fresh hedge fund action regarding NCR Corporation (NYSE:NCR).

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

Heading into the second quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 32 hedge funds with a bullish position in NCR a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in NCR Corporation (NYSE:NCR) was held by Engaged Capital, which reported holding $89.4 million worth of stock at the end of December. It was followed by Point72 Asset Management with a $58.9 million position. Other investors bullish on the company included Light Street Capital, Nitorum Capital, and Masters Capital Management. In terms of the portfolio weights assigned to each position Cowbird Capital allocated the biggest weight to NCR Corporation (NYSE:NCR), around 14.71% of its 13F portfolio. Cowbird Capital is also relatively very bullish on the stock, designating 12.73 percent of its 13F equity portfolio to NCR.

Judging by the fact that NCR Corporation (NYSE:NCR) has experienced declining sentiment from the smart money, we can see that there was a specific group of funds that slashed their entire stakes heading into Q2. At the top of the heap, David Einhorn's Greenlight Capital said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $38.6 million in stock. Richard Mashaal's fund, Rima Senvest Management, also said goodbye to its stock, about $15.2 million worth. These moves are interesting, as total hedge fund interest dropped by 8 funds heading into Q2.

Let's now take a look at hedge fund activity in other stocks similar to NCR Corporation (NYSE:NCR). These stocks are Cirrus Logic, Inc. (NASDAQ:CRUS), Power Integrations Inc (NASDAQ:POWI), Signify Health, Inc. (NYSE:SGFY), STAAR Surgical Company (NASDAQ:STAA), Lazard Ltd (NYSE:LAZ), Rackspace Technology, Inc. (NASDAQ:RXT), and Spirit Realty Capital Inc (NYSE:SRC). All of these stocks' market caps are closest to NCR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRUS,26,286037,-2 POWI,18,136336,1 SGFY,28,189217,28 STAA,16,1291146,-1 LAZ,19,770857,-1 RXT,11,125806,-3 SRC,18,166994,1 Average,19.4,423770,3.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $424 million. That figure was $383 million in NCR's case. Signify Health, Inc. (NYSE:SGFY) is the most popular stock in this table. On the other hand Rackspace Technology, Inc. (NASDAQ:RXT) is the least popular one with only 11 bullish hedge fund positions. NCR Corporation (NYSE:NCR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NCR is 52.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on NCR, though not to the same extent, as the stock returned 15.3% since Q1 (through July 16th) and outperformed the market as well.

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