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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of New Mountain Finance Corp. (NYSE:NMFC) based on that data and determine whether they were really smart about the stock.
Is New Mountain Finance Corp. (NYSE:NMFC) a sound stock to buy now? Hedge funds were in a bearish mood. The number of long hedge fund bets fell by 4 recently. Our calculations also showed that NMFC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). NMFC was in 13 hedge funds' portfolios at the end of the first quarter of 2020. There were 17 hedge funds in our database with NMFC holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are numerous gauges shareholders have at their disposal to appraise publicly traded companies. Some of the most underrated gauges are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top fund managers can trounce the market by a healthy amount (see the details here).
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Richard Chilton of Chilton Investment Company[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 7 most expensive cigarette brands to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's analyze the latest hedge fund action regarding New Mountain Finance Corp. (NYSE:NMFC).
How are hedge funds trading New Mountain Finance Corp. (NYSE:NMFC)?
Heading into the second quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in NMFC a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in New Mountain Finance Corp. (NYSE:NMFC) was held by Arrowstreet Capital, which reported holding $5.1 million worth of stock at the end of September. It was followed by Chilton Investment Company with a $2.8 million position. Other investors bullish on the company included McKinley Capital Management, Two Sigma Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position McKinley Capital Management allocated the biggest weight to New Mountain Finance Corp. (NYSE:NMFC), around 0.12% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to NMFC.
Seeing as New Mountain Finance Corp. (NYSE:NMFC) has experienced falling interest from hedge fund managers, it's easy to see that there was a specific group of hedgies who were dropping their entire stakes by the end of the first quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP cut the biggest stake of all the hedgies followed by Insider Monkey, totaling an estimated $1.9 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also said goodbye to its stock, about $0.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 4 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as New Mountain Finance Corp. (NYSE:NMFC) but similarly valued. We will take a look at Stock Yards Bancorp, Inc. (NASDAQ:SYBT), PetIQ, Inc. (NASDAQ:PETQ), Avita Therapeutics, Inc. (NASDAQ:RCEL), and Codexis, Inc. (NASDAQ:CDXS). All of these stocks' market caps are closest to NMFC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SYBT,7,12244,-1 PETQ,13,87376,-2 RCEL,3,32836,0 CDXS,8,151091,-2 Average,7.75,70887,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $14 million in NMFC's case. PetIQ, Inc. (NASDAQ:PETQ) is the most popular stock in this table. On the other hand Avita Therapeutics, Inc. (NASDAQ:RCEL) is the least popular one with only 3 bullish hedge fund positions. New Mountain Finance Corp. (NYSE:NMFC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on NMFC as the stock returned 36.4% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.