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Hedge Funds Have Never Been More Bullish On NACCO Industries, Inc. (NC)

Nina Todic

How do we determine whether NACCO Industries, Inc. (NYSE:NC) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is NACCO Industries, Inc. (NYSE:NC) a bargain? Prominent investors are becoming more confident. The number of bullish hedge fund positions inched up by 3 in recent months. Our calculations also showed that nc isn't among the 30 most popular stocks among hedge funds. NC was in 9 hedge funds' portfolios at the end of the first quarter of 2019. There were 6 hedge funds in our database with NC holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

Let's take a look at the new hedge fund action regarding NACCO Industries, Inc. (NYSE:NC).

Hedge fund activity in NACCO Industries, Inc. (NYSE:NC)

Heading into the second quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards NC over the last 15 quarters. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

No of Hedge Funds with NC Positions

The largest stake in NACCO Industries, Inc. (NYSE:NC) was held by Renaissance Technologies, which reported holding $10.1 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $0.8 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and D E Shaw.

As industrywide interest jumped, some big names have jumped into NACCO Industries, Inc. (NYSE:NC) headfirst. Millennium Management, managed by Israel Englander, initiated the largest position in NACCO Industries, Inc. (NYSE:NC). Millennium Management had $0.4 million invested in the company at the end of the quarter. Chuck Royce's Royce & Associates also initiated a $0 million position during the quarter. The only other fund with a brand new NC position is Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as NACCO Industries, Inc. (NYSE:NC) but similarly valued. These stocks are Sierra Metals Inc. (NYSE:SMTS), Ooma Inc (NYSE:OOMA), Chaparral Energy, Inc. (NYSE:CHAP), and Marlin Business Services Corp. (NASDAQ:MRLN). This group of stocks' market values resemble NC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SMTS,1,28,1 OOMA,17,71271,2 CHAP,13,100399,-1 MRLN,5,85316,0 Average,9,64254,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $12 million in NC's case. Ooma Inc (NYSE:OOMA) is the most popular stock in this table. On the other hand Sierra Metals Inc. (NYSE:SMTS) is the least popular one with only 1 bullish hedge fund positions. NACCO Industries, Inc. (NYSE:NC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on NC as the stock returned 29.2% during the same time frame and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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