At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
NII Holdings, Inc. (NASDAQ:NIHD) was in 18 hedge funds' portfolios at the end of December. NIHD investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 17 hedge funds in our database with NIHD holdings at the end of the previous quarter. Our calculations also showed that NIHD isn't among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a peek at the fresh hedge fund action surrounding NII Holdings, Inc. (NASDAQ:NIHD).
What does the smart money think about NII Holdings, Inc. (NASDAQ:NIHD)?
Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NIHD over the last 14 quarters. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in NII Holdings, Inc. (NASDAQ:NIHD) was held by 683 Capital Partners, which reported holding $58.1 million worth of stock at the end of December. It was followed by Point State Capital with a $14.6 million position. Other investors bullish on the company included Iszo Capital, Kavi Asset Management, and BeaconLight Capital.
As industrywide interest jumped, key money managers were leading the bulls' herd. Iszo Capital, managed by Brian Sheehy, assembled the largest position in NII Holdings, Inc. (NASDAQ:NIHD). Iszo Capital had $10.7 million invested in the company at the end of the quarter. Manoneet Singh's Kavi Asset Management also initiated a $8.5 million position during the quarter. The other funds with brand new NIHD positions are Ed Bosek's BeaconLight Capital, David Halpert's Prince Street Capital Management, and Andrew Hahn's Ursa Fund Management.
Let's now take a look at hedge fund activity in other stocks similar to NII Holdings, Inc. (NASDAQ:NIHD). These stocks are Clementia Pharmaceuticals Inc. (NASDAQ:CMTA), Innovative Industrial Properties, Inc. (NYSE:IIPR), On Deck Capital Inc (NYSE:ONDK), and Ready Capital Corporation (RC). This group of stocks' market valuations are similar to NIHD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CMTA,12,216373,2 IIPR,8,18371,0 ONDK,20,119246,-1 RC,6,35817,2 Average,11.5,97452,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $117 million in NIHD's case. On Deck Capital Inc (NYSE:ONDK) is the most popular stock in this table. On the other hand Ready Capital Corporation (RC) is the least popular one with only 6 bullish hedge fund positions. NII Holdings, Inc. (NASDAQ:NIHD) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately NIHD wasn't nearly as popular as these 15 stock and hedge funds that were betting on NIHD were disappointed as the stock returned -53.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.