Hedge Funds Have Never Been This Bullish On Neenah Inc. (NP)
Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Neenah Inc. (NYSE:NP) based on that data and determine whether they were really smart about the stock.
Neenah Inc. (NYSE:NP) shareholders have witnessed an increase in activity from the world's largest hedge funds recently. Our calculations also showed that NP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_693173" align="aligncenter" width="397"]
Paul Hondros of AlphaOne Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a gander at the recent hedge fund action regarding Neenah Inc. (NYSE:NP).
Hedge fund activity in Neenah Inc. (NYSE:NP)
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NP over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Neenah Inc. (NYSE:NP), which was worth $6.5 million at the end of the third quarter. On the second spot was Millennium Management which amassed $4.9 million worth of shares. Marshall Wace LLP, D E Shaw, and Renaissance Technologies 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 AlphaOne Capital Partners allocated the biggest weight to Neenah Inc. (NYSE:NP), around 0.36% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to NP.
As industrywide interest jumped, specific money managers have been driving this bullishness. D E Shaw, managed by D. E. Shaw, initiated the most valuable position in Neenah Inc. (NYSE:NP). D E Shaw had $1.6 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also initiated a $1.2 million position during the quarter. The other funds with new positions in the stock are Donald Sussman's Paloma Partners, Jonathan Soros's JS Capital, and Paul Hondros's AlphaOne Capital Partners.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Neenah Inc. (NYSE:NP) but similarly valued. These stocks are Welbilt, Inc. (NYSE:WBT), Kearny Financial Corp. (NASDAQ:KRNY), Omeros Corporation (NASDAQ:OMER), and Heritage Financial Corporation (NASDAQ:HFWA). This group of stocks' market valuations match NP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WBT,25,198010,-3 KRNY,15,74519,-6 OMER,9,125041,2 HFWA,6,12043,0 Average,13.75,102403,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $102 million. That figure was $23 million in NP's case. Welbilt, Inc. (NYSE:WBT) is the most popular stock in this table. On the other hand Heritage Financial Corporation (NASDAQ:HFWA) is the least popular one with only 6 bullish hedge fund positions. Neenah Inc. (NYSE:NP) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately NP wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NP investors were disappointed as the stock returned 11.2% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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