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Hedge Funds Are Betting On Navistar International Corp (NAV)

Abigail Fisher

Is Navistar International Corp (NYSE:NAV) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Navistar International Corp (NYSE:NAV) shareholders have witnessed an increase in hedge fund interest recently. Our calculations also showed that NAV isn't among the 30 most popular stocks among hedge funds.

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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Most Popular Stocks Among Hedge Funds

Let's check out the key hedge fund action regarding Navistar International Corp (NYSE:NAV).

Hedge fund activity in Navistar International Corp (NYSE:NAV)

At Q3's end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in NAV heading into this year. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

NAV_dec2018

The largest stake in Navistar International Corp (NYSE:NAV) was held by Icahn Capital LP, which reported holding $644.1 million worth of stock at the end of September. It was followed by MHR Fund Management with a $624.7 million position. Other investors bullish on the company included GAMCO Investors, Citadel Investment Group, and Millennium Management.

As industrywide interest jumped, key hedge funds were leading the bulls' herd. GAMCO Investors, managed by Mario Gabelli, established the most outsized position in Navistar International Corp (NYSE:NAV). GAMCO Investors had $199.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $8.4 million position during the quarter. The other funds with brand new NAV positions are Brian Gustavson and Andrew Haley's 1060 Capital Management, Mike Vranos's Ellington, and Jim Simons's Renaissance Technologies.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Navistar International Corp (NYSE:NAV) but similarly valued. We will take a look at ViaSat, Inc. (NASDAQ:VSAT), Weingarten Realty Investors (NYSE:WRI), Boyd Gaming Corporation (NYSE:BYD), and Lumentum Holdings Inc (NASDAQ:LITE). This group of stocks' market valuations resemble NAV's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VSAT,18,2031149,2 WRI,11,55663,0 BYD,33,759409,6 LITE,33,197140,-3 Average,23.75,760840,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $761 million. That figure was $1.66 billion in NAV's case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand Weingarten Realty Investors (NYSE:WRI) is the least popular one with only 11 bullish hedge fund positions. Navistar International Corp (NYSE:NAV) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard BYD might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

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