We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards nVent Electric plc (NYSE:NVT) and determine whether hedge funds skillfully traded this stock.
nVent Electric plc (NYSE:NVT) investors should pay attention to an increase in hedge fund interest of late. Our calculations also showed that NVT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most market participants, hedge funds are seen as worthless, old investment vehicles of yesteryear. While there are over 8000 funds trading at present, Our experts look at the crème de la crème of this club, around 850 funds. These investment experts shepherd the majority of the smart money's total asset base, and by paying attention to their unrivaled picks, Insider Monkey has deciphered a number of investment strategies that have historically outpaced the market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_26092" align="aligncenter" width="400"] Joel Greenblatt of Gotham Asset Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a gander at the recent hedge fund action encompassing nVent Electric plc (NYSE:NVT).
What does smart money think about nVent Electric plc (NYSE:NVT)?
Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in NVT a year ago. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Trian Partners held the most valuable stake in nVent Electric plc (NYSE:NVT), which was worth $228.7 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $68.4 million worth of shares. Adage Capital Management, TOMS Capital, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to nVent Electric plc (NYSE:NVT), around 3.3% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, earmarking 0.99 percent of its 13F equity portfolio to NVT.
Consequently, key money managers were breaking ground themselves. Carlson Capital, managed by Clint Carlson, established the largest position in nVent Electric plc (NYSE:NVT). Carlson Capital had $3 million invested in the company at the end of the quarter. Joseph Samuels's Islet Management also made a $2.5 million investment in the stock during the quarter. The following funds were also among the new NVT investors: Greg Eisner's Engineers Gate Manager, Joel Greenblatt's Gotham Asset Management, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's check out hedge fund activity in other stocks similar to nVent Electric plc (NYSE:NVT). We will take a look at Q2 Holdings Inc (NYSE:QTWO), UniFirst Corp (NYSE:UNF), Watts Water Technologies Inc (NYSE:WTS), and Avista Corp (NYSE:AVA). This group of stocks' market valuations are closest to NVT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QTWO,18,217845,-2 UNF,17,75902,-4 WTS,19,237163,0 AVA,18,145437,3 Average,18,169087,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $454 million in NVT's case. Watts Water Technologies Inc (NYSE:WTS) is the most popular stock in this table. On the other hand UniFirst Corp (NYSE:UNF) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks nVent Electric plc (NYSE:NVT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately NVT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on NVT were disappointed as the stock returned 12.2% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.