Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Nova Measuring Instruments Ltd. (NASDAQ:NVMI).
Nova Measuring Instruments Ltd. (NASDAQ:NVMI) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds' portfolios at the end of the fourth quarter of 2018. At the end of this article we will also compare NVMI to other stocks including Civitas Solutions Inc (NYSE:CIVI), SIGA Technologies Inc. (NASDAQ:SIGA), and i3 Verticals, Inc. (NASDAQ:IIIV) to get a better sense of its popularity.
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.
Let's go over the recent hedge fund action surrounding Nova Measuring Instruments Ltd. (NASDAQ:NVMI).
Hedge fund activity in Nova Measuring Instruments Ltd. (NASDAQ:NVMI)
Heading into the first quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in NVMI a year ago. So, let's review 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 Nova Measuring Instruments Ltd. (NASDAQ:NVMI), which was worth $45.9 million at the end of the fourth quarter. On the second spot was Adage Capital Management which amassed $14.6 million worth of shares. Moreover, Royce & Associates, PDT Partners, and Marshall Wace LLP were also bullish on Nova Measuring Instruments Ltd. (NASDAQ:NVMI), allocating a large percentage of their portfolios to this stock.
Due to the fact that Nova Measuring Instruments Ltd. (NASDAQ:NVMI) has experienced falling interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of hedge funds that elected to cut their full holdings heading into Q3. At the top of the heap, Cliff Asness's AQR Capital Management sold off the largest position of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $0.3 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital was right behind this move, as the fund sold off about $0 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Nova Measuring Instruments Ltd. (NASDAQ:NVMI). These stocks are Civitas Solutions Inc (NYSE:CIVI), SIGA Technologies Inc. (NASDAQ:SIGA), i3 Verticals, Inc. (NASDAQ:IIIV), and Univest Corp. of PA (NASDAQ:UVSP). All of these stocks' market caps are closest to NVMI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CIVI,15,76552,3 SIGA,10,44299,1 IIIV,8,78989,-4 UVSP,5,25481,-2 Average,9.5,56330,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $74 million in NVMI's case. Civitas Solutions Inc (NYSE:CIVI) is the most popular stock in this table. On the other hand Univest Corp. of PA (NASDAQ:UVSP) is the least popular one with only 5 bullish hedge fund positions. Nova Measuring Instruments Ltd. (NASDAQ:NVMI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on NVMI as the stock returned 24.8% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.