We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like NVE Corporation (NASDAQ:NVEC).
NVE Corporation (NASDAQ:NVEC) has experienced an increase in hedge fund interest recently. NVEC was in 11 hedge funds' portfolios at the end of the third quarter of 2019. There were 7 hedge funds in our database with NVEC holdings at the end of the previous quarter. Our calculations also showed that NVEC 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.
In the eyes of most market participants, hedge funds are perceived as slow, outdated investment tools of yesteryear. While there are greater than 8000 funds trading at present, We choose to focus on the bigwigs of this group, around 750 funds. Most estimates calculate that this group of people oversee the majority of the hedge fund industry's total asset base, and by paying attention to their matchless picks, Insider Monkey has figured out many investment strategies that have historically beaten the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman of GLG Partners[/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. We're going to take a peek at the latest hedge fund action surrounding NVE Corporation (NASDAQ:NVEC).
What does smart money think about NVE Corporation (NASDAQ:NVEC)?
At Q3's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 57% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in NVEC 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.
Among these funds, Renaissance Technologies held the most valuable stake in NVE Corporation (NASDAQ:NVEC), which was worth $11.3 million at the end of the third quarter. On the second spot was Millennium Management which amassed $3.1 million worth of shares. Marshall Wace, GLG Partners, 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 Skylands Capital allocated the biggest weight to NVE Corporation (NASDAQ:NVEC), around 0.09% of its 13F portfolio. Marshall Wace is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to NVEC.
As one would reasonably expect, some big names have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the biggest position in NVE Corporation (NASDAQ:NVEC). Citadel Investment Group had $1.5 million invested in the company at the end of the quarter. Cliff Asness's AQR Capital Management also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel's Two Sigma Advisors and Chuck Royce's Royce & Associates.
Let's check out hedge fund activity in other stocks similar to NVE Corporation (NASDAQ:NVEC). These stocks are Ryerson Holding Corporation (NYSE:RYI), Pulse Biosciences, Inc (NASDAQ:PLSE), Titan Machinery Inc. (NASDAQ:TITN), and American Outdoor Brands Corporation (NASDAQ:AOBC). This group of stocks' market valuations are closest to NVEC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RYI,13,11101,-3 PLSE,1,232,0 TITN,14,20329,-4 AOBC,17,51290,1 Average,11.25,20738,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $24 million in NVEC's case. American Outdoor Brands Corporation (NASDAQ:AOBC) is the most popular stock in this table. On the other hand Pulse Biosciences, Inc (NASDAQ:PLSE) is the least popular one with only 1 bullish hedge fund positions. NVE Corporation (NASDAQ:NVEC) 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 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. Unfortunately NVEC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NVEC investors were disappointed as the stock returned -2.6% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.