Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 20 stock picks easily bested the broader market, at 37.4% compared to 27.5%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Navigator Holdings Ltd (NYSE:NVGS) has seen an increase in enthusiasm from smart money of late. Our calculations also showed that NVGS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to review the fresh hedge fund action regarding Navigator Holdings Ltd (NYSE:NVGS).
What does smart money think about Navigator Holdings Ltd (NYSE:NVGS)?
Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NVGS over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Navigator Holdings Ltd (NYSE:NVGS) was held by Invesco Private Capital (WL Ross), which reported holding $233.5 million worth of stock at the end of September. It was followed by Horizon Asset Management with a $14.5 million position. Other investors bullish on the company included Royce & Associates, Minerva Advisors, and GAMCO Investors. In terms of the portfolio weights assigned to each position Invesco Private Capital (WL Ross) allocated the biggest weight to Navigator Holdings Ltd (NYSE:NVGS), around 63.92% of its 13F portfolio. Emancipation Capital is also relatively very bullish on the stock, designating 6.21 percent of its 13F equity portfolio to NVGS.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, established the biggest position in Navigator Holdings Ltd (NYSE:NVGS). Millennium Management had $0.4 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.3 million position during the quarter.
Let's also examine hedge fund activity in other stocks similar to Navigator Holdings Ltd (NYSE:NVGS). We will take a look at Translate Bio, Inc. (NASDAQ:TBIO), nLIGHT, Inc. (NASDAQ:LASR), Century Aluminum Co (NASDAQ:CENX), and Harmonic Inc (NASDAQ:HLIT). All of these stocks' market caps are closest to NVGS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TBIO,10,228827,0 LASR,6,41084,1 CENX,12,27232,-2 HLIT,19,80499,5 Average,11.75,94411,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $276 million in NVGS's case. Harmonic Inc (NASDAQ:HLIT) is the most popular stock in this table. On the other hand nLIGHT, Inc. (NASDAQ:LASR) is the least popular one with only 6 bullish hedge fund positions. Navigator Holdings Ltd (NYSE:NVGS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on NVGS as the stock returned 12.7% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.