Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards National Bank Holdings Corp (NYSE:NBHC).
Is National Bank Holdings Corp (NYSE:NBHC) a buy right now? Hedge funds are getting more optimistic. The number of bullish hedge fund positions inched up by 1 in recent months. Our calculations also showed that NBHC isn't among the 30 most popular stocks among hedge funds.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a glance at the recent hedge fund action encompassing National Bank Holdings Corp (NYSE:NBHC).
How have hedgies been trading National Bank Holdings Corp (NYSE:NBHC)?
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the second quarter of 2018. On the other hand, there were a total of 10 hedge funds with a bullish position in NBHC 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.
Among these funds, Renaissance Technologies held the most valuable stake in National Bank Holdings Corp (NYSE:NBHC), which was worth $45.3 million at the end of the fourth quarter. On the second spot was Elizabeth Park Capital Management which amassed $17.4 million worth of shares. Moreover, Millennium Management, Citadel Investment Group, and AQR Capital Management were also bullish on National Bank Holdings Corp (NYSE:NBHC), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key money managers have jumped into National Bank Holdings Corp (NYSE:NBHC) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the largest position in National Bank Holdings Corp (NYSE:NBHC). Marshall Wace LLP had $0.6 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $0.5 million position during the quarter.
Let's now review hedge fund activity in other stocks similar to National Bank Holdings Corp (NYSE:NBHC). These stocks are The Buckle, Inc. (NYSE:BKE), Clovis Oncology Inc (NASDAQ:CLVS), MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI), and Tennant Company (NYSE:TNC). All of these stocks' market caps are similar to NBHC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BKE,13,31406,-2 CLVS,24,452155,-8 MTSI,15,108054,5 TNC,10,62023,-1 Average,15.5,163410,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $87 million in NBHC's case. Clovis Oncology Inc (NASDAQ:CLVS) is the most popular stock in this table. On the other hand Tennant Company (NYSE:TNC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks National Bank Holdings Corp (NYSE:NBHC) is even less popular than TNC. Hedge funds dodged a bullet by taking a bearish stance towards NBHC. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately NBHC wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); NBHC investors were disappointed as the stock returned 11.6% 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.