Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Navigator Holdings Ltd (NYSE:NVGS).
Is Navigator Holdings Ltd (NYSE:NVGS) a bargain? The smart money is in an optimistic mood. The number of long hedge fund bets went up by 1 in recent months. Our calculations also showed that NVGS isn't among the 30 most popular stocks among hedge funds (see the video below). NVGS was in 14 hedge funds' portfolios at the end of June. There were 13 hedge funds in our database with NVGS holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's check out the key hedge fund action surrounding Navigator Holdings Ltd (NYSE:NVGS).
What does smart money think about Navigator Holdings Ltd (NYSE:NVGS)?
Heading into the third quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in NVGS a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Navigator Holdings Ltd (NYSE:NVGS) was held by Invesco Private Capital (WL Ross), which reported holding $204.6 million worth of stock at the end of March. It was followed by Horizon Asset Management with a $13.2 million position. Other investors bullish on the company included Royce & Associates, Minerva Advisors, and GAMCO Investors.
Now, key money managers were breaking ground themselves. Corsair Capital Management, managed by Jay Petschek and Steven Major, established the most outsized position in Navigator Holdings Ltd (NYSE:NVGS). Corsair Capital Management had $0.6 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $0.1 million investment in the stock during the quarter. The other funds with brand new NVGS positions are Paul Tudor Jones's Tudor Investment Corp and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Navigator Holdings Ltd (NYSE:NVGS) but similarly valued. These stocks are Ribbon Communications Inc. (NASDAQ:RBBN), QCR Holdings, Inc. (NASDAQ:QCRH), Diamond S Shipping Inc. (NYSE:DSSI), and Fossil Group Inc (NASDAQ:FOSL). This group of stocks' market caps resemble NVGS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RBBN,11,36379,-1 QCRH,8,65558,-2 DSSI,11,149769,4 FOSL,13,66559,-4 Average,10.75,79566,-0.75 [/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 $80 million. That figure was $241 million in NVGS's case. Fossil Group Inc (NASDAQ:FOSL) is the most popular stock in this table. On the other hand QCR Holdings, Inc. (NASDAQ:QCRH) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Navigator Holdings Ltd (NYSE:NVGS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on NVGS as the stock returned 14.1% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.