Did Hedge Funds Drop The Ball On Nordic American Tanker Ltd (NAT) ?
We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Nordic American Tanker Ltd (NYSE:NAT).
Hedge fund interest in Nordic American Tanker Ltd (NYSE:NAT) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare NAT to other stocks including Graf Industrial Corp. (NYSE:GRAF), Tribune Publishing Company (NASDAQ:TPCO), and Great Ajax Corp (NYSE:AJX) to get a better sense of its popularity.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_258236" align="alignnone" width="600"]
Ken Griffin of Citadel Investment Group[/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 review the new hedge fund action regarding Nordic American Tanker Ltd (NYSE:NAT).
Hedge fund activity in Nordic American Tanker Ltd (NYSE:NAT)
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 6 hedge funds with a bullish position in NAT a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Nordic American Tanker Ltd (NYSE:NAT), which was worth $2.3 million at the end of the third quarter. On the second spot was D E Shaw which amassed $0.8 million worth of shares. Renaissance Technologies, Millennium Management, and Marshall Wace 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 Tudor Investment Corp allocated the biggest weight to Nordic American Tanker Ltd (NYSE:NAT), around 0.01% of its 13F portfolio. Marshall Wace is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to NAT.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks similar to Nordic American Tanker Ltd (NYSE:NAT). These stocks are Graf Industrial Corp. (NYSE:GRAF), Tribune Publishing Company (NASDAQ:TPCO), Great Ajax Corp (NYSE:AJX), and Nathan's Famous, Inc. (NASDAQ:NATH). This group of stocks' market caps match NAT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GRAF,12,53730,0 TPCO,15,14906,2 AJX,8,18528,0 NATH,4,39575,-2 Average,9.75,31685,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $6 million in NAT's case. Tribune Publishing Company (NASDAQ:TPCO) is the most popular stock in this table. On the other hand Nathan's Famous, Inc. (NASDAQ:NATH) is the least popular one with only 4 bullish hedge fund positions. Nordic American Tanker Ltd (NYSE:NAT) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on NAT as the stock returned 67.6% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
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