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Hedge Funds Have Never Been More Bullish On NV5 Holdings Inc (NVEE)

Reymerlyn Martin

At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Hedge fund interest in NV5 Holdings Inc (NASDAQ:NVEE) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare NVEE to other stocks including Irsa Inversiones y Rprsntcins SA (NYSE:IRS), Rite Aid Corporation (NYSE:RAD), and Vericel Corp (NASDAQ:VCEL) to get a better sense of its popularity.

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 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 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.

AlphaOne Capital Partners' Returns, AUM and Holdings

Let's take a glance at the new hedge fund action encompassing NV5 Holdings Inc (NASDAQ:NVEE).

What have hedge funds been doing with NV5 Holdings Inc (NASDAQ:NVEE)?

At the end of the fourth quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in NVEE a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

NVEE_may2019

Among these funds, Manatuck Hill Partners held the most valuable stake in NV5 Holdings Inc (NASDAQ:NVEE), which was worth $12 million at the end of the fourth quarter. On the second spot was Driehaus Capital which amassed $9.4 million worth of shares. Moreover, Cruiser Capital Advisors, AlphaOne Capital Partners, and Royce & Associates were also bullish on NV5 Holdings Inc (NASDAQ:NVEE), allocating a large percentage of their portfolios to this stock.

Since NV5 Holdings Inc (NASDAQ:NVEE) has experienced falling interest from the smart money, it's safe to say that there is a sect of funds that decided to sell off their entire stakes heading into Q3. At the top of the heap, Charles Paquelet's Skylands Capital said goodbye to the largest position of the "upper crust" of funds followed by Insider Monkey, comprising about $0.7 million in stock, and Mike Vranos's Ellington was right behind this move, as the fund sold off about $0.2 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as NV5 Holdings Inc (NASDAQ:NVEE) but similarly valued. We will take a look at Irsa Inversiones y Rprsntcins SA (NYSE:IRS), Rite Aid Corporation (NYSE:RAD), Vericel Corp (NASDAQ:VCEL), and Golar LNG Partners LP (NASDAQ:GMLP). This group of stocks' market valuations are similar to NVEE's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IRS,7,59154,-3 RAD,13,32565,-5 VCEL,19,213562,-1 GMLP,4,26974,-2 Average,10.75,83064,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $34 million in NVEE's case. Vericel Corp (NASDAQ:VCEL) is the most popular stock in this table. On the other hand Golar LNG Partners LP (NASDAQ:GMLP) is the least popular one with only 4 bullish hedge fund positions. NV5 Holdings Inc (NASDAQ:NVEE) 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 NVEE wasn't nearly as popular as these 15 stock and hedge funds that were betting on NVEE were disappointed as the stock returned -0.4% 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.

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