At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards NetSol Technologies Inc. (NASDAQ:NTWK).
NetSol Technologies Inc. (NASDAQ:NTWK) was in 4 hedge funds' portfolios at the end of March. NTWK has experienced a decrease in enthusiasm from smart money lately. There were 5 hedge funds in our database with NTWK positions at the end of the previous quarter. Our calculations also showed that NTWK 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 financial world there are plenty of indicators stock traders have at their disposal to evaluate publicly traded companies. A couple of the less known indicators are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top money managers can outpace the market by a solid margin (see the details here).
[caption id="attachment_673876" align="aligncenter" width="394"] John Overdeck of Two Sigma Advisors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a gander at the fresh hedge fund action encompassing NetSol Technologies Inc. (NASDAQ:NTWK).
What does smart money think about NetSol Technologies Inc. (NASDAQ:NTWK)?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NTWK over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Michael M. Rothenberg's Moab Capital Partners has the most valuable position in NetSol Technologies Inc. (NASDAQ:NTWK), worth close to $2.8 million, corresponding to 1.2% of its total 13F portfolio. Coming in second is Renaissance Technologies, holding a $1.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism include John Overdeck and David Siegel's Two Sigma Advisors, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and . In terms of the portfolio weights assigned to each position Moab Capital Partners allocated the biggest weight to NetSol Technologies Inc. (NASDAQ:NTWK), around 1.18% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0013 percent of its 13F equity portfolio to NTWK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: GLG Partners. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified NTWK as a viable investment and initiated a position in the stock.
Let's go over hedge fund activity in other stocks similar to NetSol Technologies Inc. (NASDAQ:NTWK). These stocks are ImmuCell Corporation (NASDAQ:ICCC), Merrimack Pharmaceuticals Inc (NASDAQ:MACK), Tocagen Inc. (NASDAQ:TOCA), and Pyxus International, Inc. (NYSE:PYX). This group of stocks' market caps match NTWK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ICCC,2,502,-1 MACK,2,4129,-3 TOCA,1,56,-3 PYX,5,1642,1 Average,2.5,1582,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $4 million in NTWK's case. Pyxus International, Inc. (NYSE:PYX) is the most popular stock in this table. On the other hand Tocagen Inc. (NASDAQ:TOCA) is the least popular one with only 1 bullish hedge fund positions. NetSol Technologies Inc. (NASDAQ:NTWK) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on NTWK as the stock returned 28.4% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.