Is Nordson Corporation (NASDAQ:NDSN) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Nordson Corporation (NASDAQ:NDSN) has experienced an increase in hedge fund sentiment recently. NDSN was in 16 hedge funds' portfolios at the end of September. There were 15 hedge funds in our database with NDSN positions at the end of the previous quarter. Our calculations also showed that NDSN isn't among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
Let's take a look at the recent hedge fund action surrounding Nordson Corporation (NASDAQ:NDSN).
What have hedge funds been doing with Nordson Corporation (NASDAQ:NDSN)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NDSN over the last 13 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Nordson Corporation (NASDAQ:NDSN), which was worth $19.4 million at the end of the third quarter. On the second spot was PDT Partners which amassed $9.9 million worth of shares. Moreover, Millennium Management, GAMCO Investors, and GLG Partners were also bullish on Nordson Corporation (NASDAQ:NDSN), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers were breaking ground themselves. GLG Partners, managed by Noam Gottesman, initiated the most outsized position in Nordson Corporation (NASDAQ:NDSN). GLG Partners had $4.7 million invested in the company at the end of the quarter. Jeffrey Talpins's Element Capital Management also initiated a $1.3 million position during the quarter. The following funds were also among the new NDSN investors: Louis Navellier's Navellier & Associates and Frederick DiSanto's Ancora Advisors.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Nordson Corporation (NASDAQ:NDSN) but similarly valued. These stocks are Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT), KAR Auction Services Inc (NYSE:KAR), Agnico Eagle Mines Limited (NYSE:AEM), and VICI Properties Inc. (NYSE:VICI). This group of stocks' market caps match NDSN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MBT,11,253236,-3 KAR,28,757789,-1 AEM,15,204024,-3 VICI,39,3561661,-5 Average,23.25,1194,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.19 billion. That figure was $55 million in NDSN's case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand Public Joint-Stock Company Mobile TeleSystems (NYSE:MBT) is the least popular one with only 11 bullish hedge fund positions. Nordson Corporation (NASDAQ:NDSN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard VICI might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.