In this article we will check out the progression of hedge fund sentiment towards NACCO Industries, Inc. (NYSE:NC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
NACCO Industries, Inc. (NYSE:NC) has seen a decrease in enthusiasm from smart money lately. Our calculations also showed that NC 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). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26255" align="aligncenter" width="400"] Louis Navellier of Navellier & Associates[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a look at the recent hedge fund action surrounding NACCO Industries, Inc. (NYSE:NC).
What does smart money think about NACCO Industries, Inc. (NYSE:NC)?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -44% from the fourth quarter of 2019. By comparison, 9 hedge funds held shares or bullish call options in NC a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in NACCO Industries, Inc. (NYSE:NC) was held by Renaissance Technologies, which reported holding $9.7 million worth of stock at the end of September. It was followed by D E Shaw with a $0.4 million position. Other investors bullish on the company included Ancora Advisors, Royce & Associates, and Springbok Capital. In terms of the portfolio weights assigned to each position Ancora Advisors allocated the biggest weight to NACCO Industries, Inc. (NYSE:NC), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to NC.
Because NACCO Industries, Inc. (NYSE:NC) has witnessed falling interest from the aggregate hedge fund industry, it's safe to say that there exists a select few hedge funds who were dropping their entire stakes last quarter. It's worth mentioning that Louis Navellier's Navellier & Associates sold off the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $0.3 million in stock, and John Overdeck and David Siegel's Two Sigma Advisors was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as NACCO Industries, Inc. (NYSE:NC) but similarly valued. We will take a look at Hurco Companies, Inc. (NASDAQ:HURC), Genesco Inc. (NYSE:GCO), Overseas Shipholding Group, Inc. (NYSE:OSG), and Ruth's Hospitality Group, Inc. (NASDAQ:RUTH). 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 HURC,5,31460,-1 GCO,11,9290,-10 OSG,11,42476,-1 RUTH,16,16583,2 Average,10.75,24952,-2.5 [/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 $25 million. That figure was $10 million in NC's case. Ruth's Hospitality Group, Inc. (NASDAQ:RUTH) is the most popular stock in this table. On the other hand Hurco Companies, Inc. (NASDAQ:HURC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks NACCO Industries, Inc. (NYSE:NC) is even less popular than HURC. Hedge funds dodged a bullet by taking a bearish stance towards NC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately NC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); NC investors were disappointed as the stock returned -5.4% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.