The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded NCR Corporation (NYSE:NCR) based on those filings.
Hedge fund interest in NCR Corporation (NYSE:NCR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare NCR to other stocks including BlackBerry Limited (NYSE:BB), Tempur Sealy International Inc. (NYSE:TPX), and J&J Snack Foods Corp. (NASDAQ:JJSF) to get a better sense of its popularity. 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 51 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.
[caption id="attachment_681361" align="aligncenter" width="400"] Glen Kacher of Light Street Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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. Keeping this in mind let's take a look at the key hedge fund action surrounding NCR Corporation (NYSE:NCR).
What does smart money think about NCR Corporation (NYSE:NCR)?
At Q1's end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in NCR a year ago. So, let's find out 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 $30.7 million at the end of the third quarter. On the second spot was D E Shaw which amassed $25.3 million worth of shares. Eminence Capital, Light Street Capital, and Engaged Capital 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 Clearline Capital allocated the biggest weight to NCR Corporation (NYSE:NCR), around 2.63% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, setting aside 2.37 percent of its 13F equity portfolio to NCR.
Seeing as NCR Corporation (NYSE:NCR) has faced bearish sentiment from hedge fund managers, we can see that there exists a select few fund managers who sold off their entire stakes by the end of the first quarter. It's worth mentioning that Andrew Rechtschaffen's AREX Capital Management dropped the largest stake of all the hedgies monitored by Insider Monkey, worth about $9.4 million in stock. James Parsons's fund, Junto Capital Management, also said goodbye to its stock, about $7.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as NCR Corporation (NYSE:NCR) but similarly valued. These stocks are BlackBerry Limited (NYSE:BB), Tempur Sealy International Inc. (NYSE:TPX), J&J Snack Foods Corp. (NASDAQ:JJSF), and Valmont Industries, Inc. (NYSE:VMI). This group of stocks' market valuations are similar to NCR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BB,22,280349,-5 TPX,38,501858,-4 JJSF,17,83077,4 VMI,24,218687,0 Average,25.25,270993,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $156 million in NCR's case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 17 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 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately NCR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on NCR were disappointed as the stock returned 2% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.