"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards National Health Investors Inc (NYSE:NHI).
National Health Investors Inc (NYSE:NHI) investors should pay attention to an increase in enthusiasm from smart money in recent months. NHI was in 15 hedge funds' portfolios at the end of the third quarter of 2019. There were 13 hedge funds in our database with NHI positions at the end of the previous quarter. Our calculations also showed that NHI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
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. Let's take a glance at the new hedge fund action surrounding National Health Investors Inc (NYSE:NHI).
What have hedge funds been doing with National Health Investors Inc (NYSE:NHI)?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NHI over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of National Health Investors Inc (NYSE:NHI), with a stake worth $75.3 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $29.1 million. Two Sigma Advisors, Winton Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to National Health Investors Inc (NYSE:NHI), around 0.13% of its 13F portfolio. Caxton Associates is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to NHI.
As industrywide interest jumped, key money managers have jumped into National Health Investors Inc (NYSE:NHI) headfirst. Paloma Partners, managed by Donald Sussman, created the biggest position in National Health Investors Inc (NYSE:NHI). Paloma Partners had $1.2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.8 million position during the quarter. The only other fund with a brand new NHI position is Steve Cohen's Point72 Asset Management.
Let's check out hedge fund activity in other stocks similar to National Health Investors Inc (NYSE:NHI). These stocks are First Hawaiian, Inc. (NASDAQ:FHB), Plains GP Holdings LP (NYSE:PAGP), Ingevity Corporation (NYSE:NGVT), and GW Pharmaceuticals plc (NASDAQ:GWPH). This group of stocks' market caps resemble NHI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FHB,18,208814,-3 PAGP,18,216040,1 NGVT,20,144120,-1 GWPH,29,508771,13 Average,21.25,269436,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $269 million. That figure was $131 million in NHI's case. GW Pharmaceuticals plc (NASDAQ:GWPH) is the most popular stock in this table. On the other hand First Hawaiian, Inc. (NASDAQ:FHB) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks National Health Investors Inc (NYSE:NHI) is even less popular than FHB. Hedge funds dodged a bullet by taking a bearish stance towards NHI. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NHI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NHI investors were disappointed as the stock returned -1.7% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.