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Should You Buy National Instruments Corporation (NATI)?

Reymerlyn Martin

With the third-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 fourth quarter. One of these stocks was National Instruments Corporation (NASDAQ:NATI).

Is National Instruments Corporation (NASDAQ:NATI) a healthy stock for your portfolio? Hedge funds are getting more bullish. The number of long hedge fund positions increased by 4 lately. Our calculations also showed that NATI isn't among the 30 most popular stocks among hedge funds.

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 18 percentage points since May 2014 through December 3, 2018 (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.

Chuck Royce

Let's take a look at the key hedge fund action surrounding National Instruments Corporation (NASDAQ:NATI).

How have hedgies been trading National Instruments Corporation (NASDAQ:NATI)?

Heading into the fourth quarter of 2018, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in NATI at the beginning of this year. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

NATI_dec2018

More specifically, Bares Capital Management was the largest shareholder of National Instruments Corporation (NASDAQ:NATI), with a stake worth $209 million reported as of the end of September. Trailing Bares Capital Management was Royce & Associates, which amassed a stake valued at $98.6 million. Praesidium Investment Management Company, Balyasny Asset Management, and Elizabeth Park Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, key money managers were leading the bulls' herd. Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, established the most valuable position in National Instruments Corporation (NASDAQ:NATI). Blue Mountain Capital had $4.4 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron's Algert Coldiron Investors also initiated a $3.8 million position during the quarter. The other funds with brand new NATI positions are Ken Fisher's Fisher Asset Management, Alec Litowitz and Ross Laser's Magnetar Capital, and D. E. Shaw's D E Shaw.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as National Instruments Corporation (NASDAQ:NATI) but similarly valued. These stocks are Berry Global Group Inc (NYSE:BERY), Sealed Air Corporation (NYSE:SEE), BOK Financial Corporation (NASDAQ:BOKF), and EQT Midstream Partners LP (NYSE:EQM). This group of stocks' market caps are similar to NATI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BERY,36,1964835,3 SEE,30,714746,5 BOKF,16,306438,2 EQM,8,69301,0 Average,22.5,763830,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $764 million. That figure was $501 million in NATI's case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand EQT Midstream Partners LP (NYSE:EQM) is the least popular one with only 8 bullish hedge fund positions. National Instruments Corporation (NASDAQ:NATI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard BERY might be a better candidate to consider a long position.

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

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