Is Nexgen Energy Ltd. (NYSEAMERICAN:NXE) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Nexgen Energy Ltd. (NYSEAMERICAN:NXE) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as The Rubicon Project Inc (NYSE:RUBI), Bonanza Creek Energy Inc (NYSE:BCEI), and Beazer Homes USA, Inc. (NYSE:BZH) to gather more data points. Our calculations also showed that NXE 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.
At the moment there are dozens of methods stock traders put to use to analyze stocks. Two of the best methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top money managers can outpace the market by a healthy amount (see the details here).
[caption id="attachment_758437" align="aligncenter" width="600"] Michael Price of MFP Investors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to review the latest hedge fund action surrounding Nexgen Energy Ltd. (NYSEAMERICAN:NXE).
What have hedge funds been doing with Nexgen Energy Ltd. (NYSEAMERICAN:NXE)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NXE over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, holds the largest position in Nexgen Energy Ltd. (NYSEAMERICAN:NXE). Empyrean Capital Partners has a $12.6 million position in the stock, comprising 0.7% of its 13F portfolio. Sitting at the No. 2 spot is Richard Gerson and Navroz D. Udwadia of Falcon Edge Capital, with a $4.7 million position; 0.9% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish consist of Eric Sprott's Sprott Asset Management, Jerome L. Simon's Lonestar Capital Management and Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk's GRT Capital Partners. In terms of the portfolio weights assigned to each position Falcon Edge Capital allocated the biggest weight to Nexgen Energy Ltd. (NYSEAMERICAN:NXE), around 0.88% of its 13F portfolio. Empyrean Capital Partners is also relatively very bullish on the stock, dishing out 0.66 percent of its 13F equity portfolio to NXE.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Nexgen Energy Ltd. (NYSEAMERICAN:NXE) but similarly valued. We will take a look at The Rubicon Project Inc (NYSE:RUBI), Bonanza Creek Energy Inc (NYSE:BCEI), Beazer Homes USA, Inc. (NYSE:BZH), and Exterran Corporation (NYSE:EXTN). This group of stocks' market values match NXE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RUBI,20,77237,4 BCEI,21,144775,6 BZH,15,49612,8 EXTN,18,46058,4 Average,18.5,79421,5.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $20 million in NXE's case. Bonanza Creek Energy Inc (NYSE:BCEI) is the most popular stock in this table. On the other hand Beazer Homes USA, Inc. (NYSE:BZH) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Nexgen Energy Ltd. (NYSEAMERICAN:NXE) is even less popular than BZH. Hedge funds dodged a bullet by taking a bearish stance towards NXE. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NXE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NXE investors were disappointed as the stock returned 0% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.