We at Insider Monkey have gone over 738 13F filings that hedge funds and famous value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article we look at what those investors think of Quanex Building Products Corporation (NYSE:NX).
Hedge fund interest in Quanex Building Products Corporation (NYSE:NX) shares was flat at the end of last quarter. This is usually a negative indicator. 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 111, Inc. (NASDAQ:YI), Montage Resources Corporation (NYSE:MR), and Boston Omaha Corporation (NASDAQ:BOMN) to gather more data points.
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.
Let's take a look at the recent hedge fund action encompassing Quanex Building Products Corporation (NYSE:NX).
How have hedgies been trading Quanex Building Products Corporation (NYSE:NX)?
At Q1's end, a total of 16 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 NX a year ago. So, let's examine 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 Quanex Building Products Corporation (NYSE:NX), which was worth $12.6 million at the end of the first quarter. On the second spot was Royce & Associates which amassed $12.2 million worth of shares. Moreover, D E Shaw, Citadel Investment Group, and Millennium Management were also bullish on Quanex Building Products Corporation (NYSE:NX), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Quanex Building Products Corporation (NYSE:NX) has experienced falling interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of funds that slashed their positions entirely heading into Q3. Interestingly, Kevin Oram and Peter Uddo's Praesidium Investment Management Company dumped the largest investment of the 700 funds tracked by Insider Monkey, valued at close to $3 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund said goodbye to about $0.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Quanex Building Products Corporation (NYSE:NX). We will take a look at 111, Inc. (NASDAQ:YI), Montage Resources Corporation (NYSE:MR), Boston Omaha Corporation (NASDAQ:BOMN), and TuanChe Limited (NASDAQ:TC). This group of stocks' market valuations resemble NX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YI,3,13149,0 MR,12,52736,4 BOMN,5,261009,1 TC,1,283,1 Average,5.25,81794,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $45 million in NX's case. Montage Resources Corporation (NYSE:MR) is the most popular stock in this table. On the other hand TuanChe Limited (NASDAQ:TC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Quanex Building Products Corporation (NYSE:NX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on NX as the stock returned 10.5% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.