Here is What Hedge Funds Think About Navios Maritime Containers L.P. (NMCI)
Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Navios Maritime Containers L.P. (NASDAQ:NMCI)? The smart money sentiment can provide an answer to this question.
Navios Maritime Containers L.P. (NASDAQ:NMCI) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of September. Our calculations also showed that NMCI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 U.S. Global Investors, Inc. (NASDAQ:GROW), Vaccinex, Inc. (NASDAQ:VCNX), and Communications Systems, Inc. (NASDAQ:JCS) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to view the new hedge fund action regarding Navios Maritime Containers L.P. (NASDAQ:NMCI).
How are hedge funds trading Navios Maritime Containers L.P. (NASDAQ:NMCI)?
At third quarter's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NMCI over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Mangrove Partners was the largest shareholder of Navios Maritime Containers L.P. (NASDAQ:NMCI), with a stake worth $3.4 million reported as of the end of September. Trailing Mangrove Partners was 683 Capital Partners, which amassed a stake valued at $2.3 million. Renaissance Technologies was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mangrove Partners allocated the biggest weight to Navios Maritime Containers L.P. (NASDAQ:NMCI), around 0.43% of its 13F portfolio. 683 Capital Partners is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to NMCI.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Renaissance Technologies).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Navios Maritime Containers L.P. (NASDAQ:NMCI) but similarly valued. These stocks are U.S. Global Investors, Inc. (NASDAQ:GROW), Vaccinex, Inc. (NASDAQ:VCNX), Communications Systems, Inc. (NASDAQ:JCS), Nine Energy Service, Inc. (NYSE:NINE), Inuvo, Inc. (NYSE:INUV), SOS Limited (NYSE:SOS), and Profire Energy, Inc. (NASDAQ:PFIE). This group of stocks' market caps are similar to NMCI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GROW,5,5976,3 VCNX,1,82,-1 JCS,2,5498,-1 NINE,6,2971,-6 INUV,3,92,0 SOS,1,32,0 PFIE,4,3409,1 Average,3.1,2580,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.1 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $6 million in NMCI's case. Nine Energy Service, Inc. (NYSE:NINE) is the most popular stock in this table. On the other hand Vaccinex, Inc. (NASDAQ:VCNX) is the least popular one with only 1 bullish hedge fund positions. Navios Maritime Containers L.P. (NASDAQ:NMCI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NMCI is 47.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on NMCI as the stock returned 146.9% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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