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Is National Bankshares (NKSH) A Good Stock To Buy?

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Abigail Fisher
·6 min read
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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to National Bankshares Inc. (NASDAQ:NKSH) changed recently.

National Bankshares Inc. (NASDAQ:NKSH) has experienced an increase in support from the world's most elite money managers of late. National Bankshares Inc. (NASDAQ:NKSH) was in 3 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 2 hedge funds in our database with NKSH positions at the end of the second quarter. Our calculations also showed that NKSH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are assumed to be slow, old investment tools of the past. While there are over 8000 funds with their doors open at present, Our experts choose to focus on the aristocrats of this club, around 850 funds. It is estimated that this group of investors preside over the lion's share of all hedge funds' total capital, and by tracking their highest performing investments, Insider Monkey has figured out numerous investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Millennium Management, Catapult Capital Management
Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to analyze the new hedge fund action encompassing National Bankshares Inc. (NASDAQ:NKSH).

How are hedge funds trading National Bankshares Inc. (NASDAQ:NKSH)?

At third quarter's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NKSH over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Royce & Associates was the largest shareholder of National Bankshares Inc. (NASDAQ:NKSH), with a stake worth $9.9 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $1.6 million. Millennium Management was 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 Royce & Associates allocated the biggest weight to National Bankshares Inc. (NASDAQ:NKSH), around 0.11% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0016 percent of its 13F equity portfolio to NKSH.

As aggregate interest increased, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the most valuable position in National Bankshares Inc. (NASDAQ:NKSH). Millennium Management had $0.3 million invested in the company at the end of the quarter.

Let's check out hedge fund activity in other stocks similar to National Bankshares Inc. (NASDAQ:NKSH). We will take a look at Jiayin Group Inc. (NASDAQ:JFIN), Sesen Bio, Inc. (NASDAQ:SESN), Big 5 Sporting Goods Corporation (NASDAQ:BGFV), IRSA Inversiones y Representaciones Sociedad Anónima (NYSE:IRS), Aquestive Therapeutics, Inc. (NASDAQ:AQST), Quad/Graphics, Inc. (NYSE:QUAD), and Anworth Mortgage Asset Corporation (NYSE:ANH). This group of stocks' market valuations are similar to NKSH's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JFIN,1,34,-2 SESN,6,7842,1 BGFV,9,18141,3 IRS,5,10713,0 AQST,8,11570,1 QUAD,8,8881,-3 ANH,11,24320,-1 Average,6.9,11643,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.9 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $12 million in NKSH's case. Anworth Mortgage Asset Corporation (NYSE:ANH) is the most popular stock in this table. On the other hand Jiayin Group Inc. (NASDAQ:JFIN) is the least popular one with only 1 bullish hedge fund positions. National Bankshares Inc. (NASDAQ:NKSH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NKSH is 46. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on NKSH as the stock returned 21.7% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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