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National Retail Properties, Inc. (NNN): Hedge Funds Heading For The Exits

Debasis Saha

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards National Retail Properties, Inc. (NYSE:NNN).

National Retail Properties, Inc. (NYSE:NNN) investors should pay attention to a decrease in enthusiasm from smart money lately. Our calculations also showed that NNN isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_673876" align="aligncenter" width="400"] John Overdeck of Two Sigma Advisors[/caption]

John Overdeck of Two Sigma
John Overdeck of Two Sigma

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a glance at the new hedge fund action encompassing National Retail Properties, Inc. (NYSE:NNN).

What does smart money think about National Retail Properties, Inc. (NYSE:NNN)?

At Q1's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in NNN over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NNN A Good Stock To Buy?
Is NNN A Good Stock To Buy?

More specifically, Two Sigma Advisors was the largest shareholder of National Retail Properties, Inc. (NYSE:NNN), with a stake worth $16.4 million reported as of the end of September. Trailing Two Sigma Advisors was Citadel Investment Group, which amassed a stake valued at $15.6 million. D E Shaw, Point72 Asset Management, and Winton Capital Management 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 Quantinno Capital allocated the biggest weight to National Retail Properties, Inc. (NYSE:NNN), around 0.33% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.27 percent of its 13F equity portfolio to NNN.

Because National Retail Properties, Inc. (NYSE:NNN) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few money managers that decided to sell off their full holdings last quarter. At the top of the heap, Greg Poole's Echo Street Capital Management cut the biggest stake of the 750 funds monitored by Insider Monkey, valued at about $35.6 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund said goodbye to about $10.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to National Retail Properties, Inc. (NYSE:NNN). These stocks are Bruker Corporation (NASDAQ:BRKR), Lumentum Holdings Inc (NASDAQ:LITE), Dolby Laboratories, Inc. (NYSE:DLB), and Bausch Health Companies (NYSE:BHC). This group of stocks' market valuations are similar to NNN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BRKR,21,109920,-4 LITE,34,487864,-3 DLB,29,374056,-2 BHC,35,1566790,4 Average,29.75,634658,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $635 million. That figure was $62 million in NNN's case. Bausch Health Companies (NYSE:BHC) is the most popular stock in this table. On the other hand Bruker Corporation (NASDAQ:BRKR) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks National Retail Properties, Inc. (NYSE:NNN) is even less popular than BRKR. Hedge funds dodged a bullet by taking a bearish stance towards NNN. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. Unfortunately NNN wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); NNN investors were disappointed as the stock returned 15.4% during the second quarter (through June 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

[company-follow-email id=751364][/company-follow-email]

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

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