Amid an overall bull market, many stocks that smart money investors were collectively bullish on 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. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Nam Tai Property Inc (NYSE:NTP) going to take off soon? Money managers are getting more optimistic. The number of bullish hedge fund positions rose by 2 in recent months. Our calculations also showed that NTP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). NTP was in 9 hedge funds' portfolios at the end of the third quarter of 2019. There were 7 hedge funds in our database with NTP holdings at the end of the previous quarter. 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' 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 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 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.
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 take a glance at the new hedge fund action surrounding Nam Tai Property Inc (NYSE:NTP).
Hedge fund activity in Nam Tai Property Inc (NYSE:NTP)
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NTP over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Nam Tai Property Inc (NYSE:NTP) was held by Iszo Capital, which reported holding $34.4 million worth of stock at the end of September. It was followed by Kahn Brothers with a $19.8 million position. Other investors bullish on the company included Prescott Group Capital Management, Raging Capital Management, and Moab Capital Partners. In terms of the portfolio weights assigned to each position Iszo Capital allocated the biggest weight to Nam Tai Property Inc (NYSE:NTP), around 45.47% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, designating 2.48 percent of its 13F equity portfolio to NTP.
As aggregate interest increased, specific money managers have jumped into Nam Tai Property Inc (NYSE:NTP) headfirst. Renaissance Technologies, established the most valuable position in Nam Tai Property Inc (NYSE:NTP). Renaissance Technologies had $0.1 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.1 million investment in the stock during the quarter.
Let's go over hedge fund activity in other stocks similar to Nam Tai Property Inc (NYSE:NTP). We will take a look at Bridgewater Bancshares, Inc. (NASDAQ:BWB), Homeowners Choice Inc (NYSE:HCI), Artesian Resources Corporation (NASDAQ:ARTNA), and Vera Bradley, Inc. (NASDAQ:VRA). This group of stocks' market caps resemble NTP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BWB,10,23914,4 HCI,12,26431,1 ARTNA,3,17330,0 VRA,15,56748,-1 Average,10,31106,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $65 million in NTP's case. Vera Bradley, Inc. (NASDAQ:VRA) is the most popular stock in this table. On the other hand Artesian Resources Corporation (NASDAQ:ARTNA) is the least popular one with only 3 bullish hedge fund positions. Nam Tai Property Inc (NYSE:NTP) is not the least popular stock in this group but hedge fund interest is still below average. 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 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. Unfortunately NTP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NTP investors were disappointed as the stock returned 1.9% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.