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Hedge Funds Are Dumping Nielsen Holdings plc (NLSN)

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In this article you are going to find out whether hedge funds think Nielsen Holdings plc (NYSE:NLSN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Nielsen Holdings plc (NYSE:NLSN) investors should pay attention to a decrease in enthusiasm from smart money recently. Nielsen Holdings plc (NYSE:NLSN) was in 28 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 35. There were 34 hedge funds in our database with NLSN positions at the end of the first quarter. Our calculations also showed that NLSN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

John Rogers’ Top 10 Stock Picks
John Rogers’ Top 10 Stock Picks

John Rogers of Ariel Investments

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a glance at the key hedge fund action regarding Nielsen Holdings plc (NYSE:NLSN).

Do Hedge Funds Think NLSN Is A Good Stock To Buy Now?

At Q2's end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in NLSN over the last 24 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NLSN A Good Stock To Buy?
Is NLSN A Good Stock To Buy?

The largest stake in Nielsen Holdings plc (NYSE:NLSN) was held by Windacre Partnership, which reported holding $868.5 million worth of stock at the end of June. It was followed by Elliott Investment Management with a $409.5 million position. Other investors bullish on the company included Ariel Investments, Cantillon Capital Management, and Brahman Capital. In terms of the portfolio weights assigned to each position Windacre Partnership allocated the biggest weight to Nielsen Holdings plc (NYSE:NLSN), around 19.19% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, dishing out 7.14 percent of its 13F equity portfolio to NLSN.

Judging by the fact that Nielsen Holdings plc (NYSE:NLSN) has experienced a decline in interest from hedge fund managers, it's easy to see that there is a sect of money managers that slashed their entire stakes last quarter. It's worth mentioning that Alex Duran and Scott Hendrickson's Permian Investment Partners dropped the biggest position of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $11 million in stock, and Andrew Kurita's Kettle Hill Capital Management was right behind this move, as the fund dumped about $10.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 6 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to Nielsen Holdings plc (NYSE:NLSN). These stocks are Builders FirstSource, Inc. (NASDAQ:BLDR), ICL Group Ltd. (NYSE:ICL), Ciena Corporation (NASDAQ:CIEN), Berry Global Group Inc (NYSE:BERY), Pearson PLC (NYSE:PSO), Paysafe Limited (NYSE:PSFE), and CyrusOne Inc (NASDAQ:CONE). All of these stocks' market caps match NLSN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BLDR,60,1946230,12 ICL,6,73199,2 CIEN,29,356029,2 BERY,37,1370409,-5 PSO,7,13925,1 PSFE,50,1124742,9 CONE,26,487917,5 Average,30.7,767493,3.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.7 hedge funds with bullish positions and the average amount invested in these stocks was $767 million. That figure was $1992 million in NLSN's case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 6 bullish hedge fund positions. Nielsen Holdings plc (NYSE:NLSN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NLSN is 43.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately NLSN wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NLSN investors were disappointed as the stock returned -19.7% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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