Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
nVent Electric plc (NYSE:NVT) was in 25 hedge funds' portfolios at the end of the first quarter of 2019. NVT has experienced a decrease in hedge fund sentiment lately. There were 28 hedge funds in our database with NVT holdings at the end of the previous quarter. Our calculations also showed that nvt 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 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 look at the latest hedge fund action encompassing nVent Electric plc (NYSE:NVT).
Hedge fund activity in nVent Electric plc (NYSE:NVT)
At Q1's end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the fourth quarter of 2018. By comparison, 0 hedge funds held shares or bullish call options in NVT a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in nVent Electric plc (NYSE:NVT) was held by Trian Partners, which reported holding $474 million worth of stock at the end of March. It was followed by Glenview Capital with a $150.5 million position. Other investors bullish on the company included Adage Capital Management, AQR Capital Management, and Scopus Asset Management.
Seeing as nVent Electric plc (NYSE:NVT) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of fund managers who were dropping their positions entirely in the third quarter. Intriguingly, David Cohen and Harold Levy's Iridian Asset Management dropped the biggest investment of the 700 funds monitored by Insider Monkey, worth about $134.6 million in stock, and James Dinan's York Capital Management was right behind this move, as the fund dumped about $57.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as nVent Electric plc (NYSE:NVT) but similarly valued. These stocks are Acuity Brands, Inc. (NYSE:AYI), The Stars Group Inc. (NASDAQ:TSG), InterXion Holding NV (NYSE:INXN), and argenx SE (NASDAQ:ARGX). This group of stocks' market values resemble NVT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AYI,29,795548,2 TSG,44,902595,4 INXN,25,741670,-3 ARGX,24,750610,-3 Average,30.5,797606,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $798 million. That figure was $920 million in NVT's case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand argenx SE (NASDAQ:ARGX) is the least popular one with only 24 bullish hedge fund positions. nVent Electric plc (NYSE:NVT) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately NVT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NVT investors were disappointed as the stock returned -12.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.