We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards National Vision Holdings, Inc. (NASDAQ:EYE).
Is National Vision Holdings, Inc. (NASDAQ:EYE) a superb stock to buy now? Investors who are in the know are in an optimistic mood. The number of long hedge fund positions advanced by 1 in recent months. Our calculations also showed that EYE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). EYE was in 22 hedge funds' portfolios at the end of September. There were 21 hedge funds in our database with EYE positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26340" align="aligncenter" width="594"] Ken Griffin of Citadel Investment Group[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's go over the fresh hedge fund action regarding National Vision Holdings, Inc. (NASDAQ:EYE).
How are hedge funds trading National Vision Holdings, Inc. (NASDAQ:EYE)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in EYE a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of National Vision Holdings, Inc. (NASDAQ:EYE), with a stake worth $181 million reported as of the end of September. Trailing Adage Capital Management was Select Equity Group, which amassed a stake valued at $68.5 million. Millennium Management, Citadel Investment Group, and Scopus Asset Management 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 Signition LP allocated the biggest weight to National Vision Holdings, Inc. (NASDAQ:EYE), around 0.9% of its 13F portfolio. Buckingham Capital Management is also relatively very bullish on the stock, dishing out 0.61 percent of its 13F equity portfolio to EYE.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the most outsized position in National Vision Holdings, Inc. (NASDAQ:EYE). Two Sigma Advisors had $1.4 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman's Paloma Partners and George Zweig, Shane Haas and Ravi Chander's Signition LP.
Let's check out hedge fund activity in other stocks similar to National Vision Holdings, Inc. (NASDAQ:EYE). These stocks are Colony Credit Real Estate, Inc. (NYSE:CLNC), Minerals Technologies Inc (NYSE:MTX), The Cheesecake Factory Incorporated (NASDAQ:CAKE), and Grupo Financiero Galicia S.A. (NASDAQ:GGAL). All of these stocks' market caps are closest to EYE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLNC,6,13571,-2 MTX,17,107111,2 CAKE,22,116362,-3 GGAL,8,25672,-4 Average,13.25,65679,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $344 million in EYE's case. The Cheesecake Factory Incorporated (NASDAQ:CAKE) is the most popular stock in this table. On the other hand Colony Credit Real Estate, Inc. (NYSE:CLNC) is the least popular one with only 6 bullish hedge fund positions. National Vision Holdings, Inc. (NASDAQ:EYE) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on EYE as the stock returned 25.5% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.