Before we spend days researching a stock idea we'd like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 8.7% through October 26th. Forty percent of the S&P 500 constituents were down more than 10%. The average return of a randomly picked stock in the index is -9.5%. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 25 most popular S&P 500 stocks among hedge funds had an average loss of 8.8%. In this article, we will take a look at what hedge funds think about The Navigators Group, Inc (NASDAQ:NAVG).
Is The Navigators Group, Inc (NASDAQ:NAVG) a safe investment today? Prominent investors are becoming more confident. The number of long hedge fund bets moved up by 5 in recent months. Our calculations also showed that NAVG isn't among the 30 most popular stocks among hedge funds. NAVG was in 17 hedge funds' portfolios at the end of the third quarter of 2018. There were 12 hedge funds in our database with NAVG positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's review the new hedge fund action regarding The Navigators Group, Inc (NASDAQ:NAVG).
How are hedge funds trading The Navigators Group, Inc (NASDAQ:NAVG)?
At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 42% from the second quarter of 2018. By comparison, 9 hedge funds held shares or bullish call options in NAVG heading into this year. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in The Navigators Group, Inc (NASDAQ:NAVG) was held by Diamond Hill Capital, which reported holding $81.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $39.9 million position. Other investors bullish on the company included Carlson Capital, Millennium Management, and Water Island Capital.
As aggregate interest increased, specific money managers were leading the bulls' herd. Carlson Capital, managed by Clint Carlson, created the most outsized position in The Navigators Group, Inc (NASDAQ:NAVG). Carlson Capital had $19 million invested in the company at the end of the quarter. John Orrico's Water Island Capital also initiated a $14 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Daniel Arbess's Perella Weinberg Partners, and Mario Gabelli's GAMCO Investors.
Let's now take a look at hedge fund activity in other stocks similar to The Navigators Group, Inc (NASDAQ:NAVG). We will take a look at Acushnet Holdings Corp. (NYSE:GOLF), Allegiant Travel Company (NASDAQ:ALGT), DoubleLine Income Solutions Fund (NYSE:DSL), and Spark Therapeutics Inc (NASDAQ:ONCE). This group of stocks' market values are closest to NAVG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GOLF,14,39395,6 ALGT,15,428697,0 DSL,2,17849,0 ONCE,21,341380,4 Average,13,206830,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $194 million in NAVG's case. Spark Therapeutics Inc (NASDAQ:ONCE) is the most popular stock in this table. On the other hand DoubleLine Income Solutions Fund (NYSE:DSL) is the least popular one with only 2 bullish hedge fund positions. The Navigators Group, Inc (NASDAQ:NAVG) 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 ONCE might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.