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In this article we will analyze whether Neenah Inc. (NYSE:NP) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Neenah (NP) a good stock to buy now? The best stock pickers were in a bearish mood. The number of long hedge fund bets were cut by 2 lately. Neenah Inc. (NYSE:NP) was in 11 hedge funds' portfolios at the end of September. The all time high for this statistics is 13. Our calculations also showed that NP 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). There were 13 hedge funds in our database with NP positions at the end of the second quarter.
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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
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 15 best blue chip stocks 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 let's take a peek at the key hedge fund action regarding Neenah Inc. (NYSE:NP).
Do Hedge Funds Think NP Is A Good Stock To Buy Now?
At Q3's end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in NP a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Neenah Inc. (NYSE:NP), with a stake worth $5.3 million reported as of the end of September. Trailing D E Shaw was Millennium Management, which amassed a stake valued at $4.5 million. Renaissance Technologies, Citadel Investment Group, and Arrowstreet 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 Engineers Gate Manager allocated the biggest weight to Neenah Inc. (NYSE:NP), around 0.05% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to NP.
Since Neenah Inc. (NYSE:NP) has witnessed bearish sentiment from the smart money, it's easy to see that there lies a certain "tier" of fund managers who were dropping their entire stakes in the third quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the biggest stake of the 750 funds tracked by Insider Monkey, worth about $2.2 million in stock, and Paul Hondros's AlphaOne Capital Partners was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Neenah Inc. (NYSE:NP) but similarly valued. These stocks are Clearwater Paper Corp (NYSE:CLW), ImmunoGen, Inc. (NASDAQ:IMGN), Betterware de Mexico, S.A.B. de C.V. (NASDAQ:BWMX), Jumia Technologies AG (NYSE:JMIA), Precigen, Inc. (NASDAQ:PGEN), Global Medical REIT Inc. (NYSE:GMRE), and Hyster-Yale Materials Handling Inc (NYSE:HY). This group of stocks' market valuations are similar to NP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLW,13,50476,-1 IMGN,18,129732,-2 BWMX,2,4322,0 JMIA,9,13534,1 PGEN,12,36166,-3 GMRE,6,13544,-1 HY,12,31979,1 Average,10.3,39965,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $21 million in NP's case. ImmunoGen, Inc. (NASDAQ:IMGN) is the most popular stock in this table. On the other hand Betterware de Mexico, S.A.B. de C.V. (NASDAQ:BWMX) is the least popular one with only 2 bullish hedge fund positions. Neenah Inc. (NYSE:NP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NP is 56.5. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on NP as the stock returned 45.4% since the end of Q3 (through 12/8) 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.