The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 24.4% through September 30th, vs. a gain of 20.4% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards NCR Corporation (NYSE:NCR), and what that likely means for the prospects of the company and its stock.
Is NCR Corporation (NYSE:NCR) the right pick for your portfolio? Investors who are in the know are turning bullish. The number of bullish hedge fund bets inched up by 2 recently. Our calculations also showed that NCR isn't among the 30 most popular stocks among hedge funds (view the video below). NCR was in 24 hedge funds' portfolios at the end of June. There were 22 hedge funds in our database with NCR positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are perceived as unimportant, outdated investment tools of the past. While there are more than 8000 funds trading today, Our experts choose to focus on the bigwigs of this group, around 750 funds. Most estimates calculate that this group of people preside over most of the hedge fund industry's total capital, and by watching their top stock picks, Insider Monkey has figured out many investment strategies that have historically beaten the market. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the latest hedge fund action surrounding NCR Corporation (NYSE:NCR).
Hedge fund activity in NCR Corporation (NYSE:NCR)
Heading into the third quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NCR over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Nitorum Capital held the most valuable stake in NCR Corporation (NYSE:NCR), which was worth $53.8 million at the end of the second quarter. On the second spot was Nishkama Capital which amassed $41.5 million worth of shares. Moreover, Engaged Capital, D E Shaw, and GLG Partners were also bullish on NCR Corporation (NYSE:NCR), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key hedge funds were breaking ground themselves. Antara Capital, managed by Himanshu Gulati, assembled the biggest call position in NCR Corporation (NYSE:NCR). Antara Capital had $4.7 million invested in the company at the end of the quarter. Ravee Mehta's Nishkama Capital also initiated a $3.3 million position during the quarter. The following funds were also among the new NCR investors: Joel Greenblatt's Gotham Asset Management, Himanshu Gulati's Antara Capital, and Michael Platt and William Reeves's BlueCrest Capital Mgmt..
Let's now take a look at hedge fund activity in other stocks similar to NCR Corporation (NYSE:NCR). These stocks are Tech Data Corporation (NASDAQ:TECD), Azul S.A. (NYSE:AZUL), Embraer SA (NYSE:ERJ), and Tandem Diabetes Care Inc (NASDAQ:TNDM). This group of stocks' market valuations resemble NCR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TECD,18,281786,-1 AZUL,13,173988,1 ERJ,7,50753,-1 TNDM,33,485692,0 Average,17.75,248055,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $264 million in NCR's case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Embraer SA (NYSE:ERJ) is the least popular one with only 7 bullish hedge fund positions. NCR Corporation (NYSE:NCR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NCR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NCR were disappointed as the stock returned 1.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.