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 nVent Electric plc (NYSE:NVT).
Is nVent Electric plc (NYSE:NVT) the right pick for your portfolio? Investors who are in the know are in a bearish mood. The number of long hedge fund bets retreated by 7 recently. Our calculations also showed that NVT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_30574" align="aligncenter" width="509"] Nelson Peltz of Trian Partners[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's view the latest hedge fund action encompassing nVent Electric plc (NYSE:NVT).
What have hedge funds been doing with nVent Electric plc (NYSE:NVT)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter of 2019. By comparison, 29 hedge funds held shares or bullish call options in NVT a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Trian Partners was the largest shareholder of nVent Electric plc (NYSE:NVT), with a stake worth $298.7 million reported as of the end of September. Trailing Trian Partners was Adage Capital Management, which amassed a stake valued at $64 million. AQR Capital Management, Iridian Asset Management, and Arrowstreet Capital were 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 Trian Partners allocated the biggest weight to nVent Electric plc (NYSE:NVT), around 3.12% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, dishing out 0.93 percent of its 13F equity portfolio to NVT.
Because nVent Electric plc (NYSE:NVT) has witnessed declining sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few fund managers that decided to sell off their entire stakes last quarter. At the top of the heap, Larry Robbins's Glenview Capital dropped the largest position of the "upper crust" of funds watched by Insider Monkey, totaling about $80.3 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also sold off its stock, about $31.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as nVent Electric plc (NYSE:NVT) but similarly valued. We will take a look at Ollie's Bargain Outlet Holdings Inc (NASDAQ:OLLI), Spark Therapeutics Inc (NASDAQ:ONCE), Q2 Holdings Inc (NYSE:QTWO), and Laureate Education, Inc. (NASDAQ:LAUR). This group of stocks' market caps are closest to NVT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OLLI,22,98695,-9 ONCE,36,1272087,-3 QTWO,16,153545,-5 LAUR,25,505326,2 Average,24.75,507413,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $507 million. That figure was $565 million in NVT's case. Spark Therapeutics Inc (NASDAQ:ONCE) is the most popular stock in this table. On the other hand Q2 Holdings Inc (NYSE:QTWO) is the least popular one with only 16 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on NVT as the stock returned 13.1% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.