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 Nam Tai Property Inc (NYSE:NTP)? The smart money sentiment can provide an answer to this question.
Nam Tai Property Inc (NYSE:NTP) has experienced an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that NTP isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the latest hedge fund action regarding Nam Tai Property Inc (NYSE:NTP).
Hedge fund activity in Nam Tai Property Inc (NYSE:NTP)
Heading into the third quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in NTP a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Iszo Capital was the largest shareholder of Nam Tai Property Inc (NYSE:NTP), with a stake worth $37.2 million reported as of the end of March. Trailing Iszo Capital was Kahn Brothers, which amassed a stake valued at $21.8 million. Prescott Group Capital Management, Raging Capital Management, and Moab Capital Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Now, specific money managers have jumped into Nam Tai Property Inc (NYSE:NTP) headfirst. Kahn Brothers, managed by Irving Kahn, assembled the most valuable position in Nam Tai Property Inc (NYSE:NTP). Kahn Brothers had $21.8 million invested in the company at the end of the quarter. David Brown's Hawk Ridge Management also made a $0.4 million investment in the stock during the quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Nam Tai Property Inc (NYSE:NTP) but similarly valued. We will take a look at Secoo Holding Limited (NASDAQ:SECO), Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Chico's FAS, Inc. (NYSE:CHS), and Computer Programs & Systems, Inc. (NASDAQ:CPSI). All of these stocks' market caps are similar to NTP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SECO,7,18956,-1 RRGB,12,31975,-3 CHS,13,41230,-2 CPSI,12,28331,-6 Average,11,30123,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $68 million in NTP's case. Chico's FAS, Inc. (NYSE:CHS) is the most popular stock in this table. On the other hand Secoo Holding Limited (NASDAQ:SECO) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Nam Tai Property Inc (NYSE:NTP) is even less popular than SECO. Hedge funds dodged a bullet by taking a bearish stance towards NTP. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NTP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NTP investors were disappointed as the stock returned -7.7% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.