We can judge whether NewMarket Corporation (NYSE:NEU) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
NewMarket Corporation (NYSE:NEU) has seen an increase in hedge fund interest of late. NEU was in 21 hedge funds' portfolios at the end of the first quarter of 2019. There were 16 hedge funds in our database with NEU holdings at the end of the previous quarter. Our calculations also showed that neu isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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're going to view the latest hedge fund action surrounding NewMarket Corporation (NYSE:NEU).
What have hedge funds been doing with NewMarket Corporation (NYSE:NEU)?
At Q1's end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 31% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in NEU a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in NewMarket Corporation (NYSE:NEU) was held by Winton Capital Management, which reported holding $23.5 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $11.6 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and GAMCO Investors.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into NewMarket Corporation (NYSE:NEU) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in NewMarket Corporation (NYSE:NEU). Arrowstreet Capital had $2.4 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser's Magnetar Capital also initiated a $1 million position during the quarter. The following funds were also among the new NEU investors: Matthew Tewksbury's Stevens Capital Management, David Costen Haley's HBK Investments, and Michael Platt and William Reeves's BlueCrest Capital Mgmt..
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as NewMarket Corporation (NYSE:NEU) but similarly valued. These stocks are Highwoods Properties Inc (NYSE:HIW), Entegris Inc (NASDAQ:ENTG), CIT Group Inc. (NYSE:CIT), and ADT Inc. (NYSE:ADT). This group of stocks' market valuations resemble NEU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HIW,14,177459,-3 ENTG,22,471301,4 CIT,25,774051,-1 ADT,16,85421,1 Average,19.25,377058,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $377 million. That figure was $88 million in NEU's case. CIT Group Inc. (NYSE:CIT) is the most popular stock in this table. On the other hand Highwoods Properties Inc (NYSE:HIW) is the least popular one with only 14 bullish hedge fund positions. NewMarket Corporation (NYSE:NEU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately NEU wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NEU were disappointed as the stock returned -8% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.