Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Navient Corp (NASDAQ:NAVI) based on that data and determine whether they were really smart about the stock.
Is Navient Corp (NASDAQ:NAVI) going to take off soon? The best stock pickers were cutting their exposure. The number of long hedge fund bets dropped by 6 in recent months. Navient Corp (NASDAQ:NAVI) was in 27 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 38. Our calculations also showed that NAVI isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Joshua Friedman of Canyon Capital Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 to get excerpts of these letters in your inbox. Keeping this in mind let's view the key hedge fund action regarding Navient Corp (NASDAQ:NAVI).
What does smart money think about Navient Corp (NASDAQ:NAVI)?
At the end of June, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NAVI over the last 20 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Navient Corp (NASDAQ:NAVI) was held by Canyon Capital Advisors, which reported holding $56.2 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $30.3 million position. Other investors bullish on the company included Omega Advisors, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Omega Advisors allocated the biggest weight to Navient Corp (NASDAQ:NAVI), around 2.39% of its 13F portfolio. Canyon Capital Advisors is also relatively very bullish on the stock, dishing out 1.88 percent of its 13F equity portfolio to NAVI.
Judging by the fact that Navient Corp (NASDAQ:NAVI) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there is a sect of fund managers who were dropping their full holdings by the end of the second quarter. It's worth mentioning that Anand Parekh's Alyeska Investment Group dropped the biggest investment of all the hedgies watched by Insider Monkey, comprising an estimated $2.8 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $2.5 million worth. These transactions are interesting, as total hedge fund interest dropped by 6 funds by the end of the second quarter.
Let's now review hedge fund activity in other stocks similar to Navient Corp (NASDAQ:NAVI). These stocks are NMI Holdings Inc (NASDAQ:NMIH), WesBanco, Inc. (NASDAQ:WSBC), Cortexyme, Inc. (NASDAQ:CRTX), Bloom Energy Corporation (NYSE:BE), First Financial Bancorp (NASDAQ:FFBC), Odonate Therapeutics, Inc. (NASDAQ:ODT), and Sprout Social, Inc. (NASDAQ:SPT). This group of stocks' market valuations match NAVI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NMIH,30,173229,7 WSBC,13,44583,4 CRTX,6,21086,0 BE,16,110425,6 FFBC,13,19498,5 ODT,16,717520,3 SPT,19,129811,3 Average,16.1,173736,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $210 million in NAVI's case. NMI Holdings Inc (NASDAQ:NMIH) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 6 bullish hedge fund positions. Navient Corp (NASDAQ:NAVI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NAVI is 64.1. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on NAVI as the stock returned 14.5% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.