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It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Neenah, Inc. (NYSE:NP).
Neenah, Inc. (NYSE:NP) has seen an increase in hedge fund interest lately. Our calculations also showed that NP 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In the eyes of most shareholders, hedge funds are viewed as slow, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open today, Our researchers hone in on the masters of this club, approximately 750 funds. These hedge fund managers shepherd bulk of all hedge funds' total capital, and by tracking their unrivaled equity investments, Insider Monkey has found a few investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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David Harding of Winton Capital Management[/caption]
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 take a look at the fresh hedge fund action encompassing Neenah, Inc. (NYSE:NP).
How are hedge funds trading Neenah, Inc. (NYSE:NP)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NP 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.
When looking at the institutional investors followed by Insider Monkey, Israel Englander's Millennium Management has the number one position in Neenah, Inc. (NYSE:NP), worth close to $5.4 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $3.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Chuck Royce's Royce & Associates, David Harding's Winton Capital Management and Minhua Zhang's Weld Capital Management. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Neenah, Inc. (NYSE:NP), around 0.23% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to NP.
Consequently, specific money managers were breaking ground themselves. Weld Capital Management, managed by Minhua Zhang, initiated the most valuable position in Neenah, Inc. (NYSE:NP). Weld Capital Management had $1.2 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $0.5 million investment in the stock during the quarter. The only other fund with a brand new NP position is Renaissance Technologies.
Let's also examine hedge fund activity in other stocks similar to Neenah, Inc. (NYSE:NP). These stocks are Enterprise Financial Services Corp (NASDAQ:EFSC), Talos Energy, Inc. (NYSE:TALO), John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), and Varex Imaging Corporation (NASDAQ:VREX). This group of stocks' market caps match NP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EFSC,12,56533,-1 TALO,15,64673,1 JBSS,15,55397,5 VREX,20,92701,0 Average,15.5,67326,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $15 million in NP's case. Varex Imaging Corporation (NASDAQ:VREX) is the most popular stock in this table. On the other hand Enterprise Financial Services Corp (NASDAQ:EFSC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Neenah, Inc. (NYSE:NP) is even less popular than EFSC. Hedge funds clearly dropped the ball on NP as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on NP as the stock returned 12.5% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.