Is NFH A Good Stock To Buy Now?
Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to New Frontier Health Corporation (NYSE:NFH) changed recently.
New Frontier Health Corporation (NYSE:NFH) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds' portfolios at the end of September. Our calculations also showed that NFH 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Yalla Group Limited (NYSE:YALA), Xenia Hotels & Resorts Inc (NYSE:XHR), and Cornerstone Building Brands, Inc. (NYSE:CNR) to gather more data points.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.
James Dinan of York Capital Management
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 we're going to view the fresh hedge fund action encompassing New Frontier Health Corporation (NYSE:NFH).
Do Hedge Funds Think NFH Is A Good Stock To Buy Now?
At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in NFH a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Vivo Capital held the most valuable stake in New Frontier Health Corporation (NYSE:NFH), which was worth $109.1 million at the end of the third quarter. On the second spot was Millennium Management which amassed $16 million worth of shares. Yiheng Capital, York Capital Management, and Segantii 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 Vivo Capital allocated the biggest weight to New Frontier Health Corporation (NYSE:NFH), around 6.31% of its 13F portfolio. Maso Capital is also relatively very bullish on the stock, dishing out 2.99 percent of its 13F equity portfolio to NFH.
Seeing as New Frontier Health Corporation (NYSE:NFH) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there were a few funds that slashed their full holdings by the end of the third quarter. Intriguingly, Anand Parekh's Alyeska Investment Group dumped the biggest investment of the "upper crust" of funds followed by Insider Monkey, valued at close to $2 million in stock, and John M. Angelo and Michael L. Gordon's Angelo Gordon & Co was right behind this move, as the fund cut about $1.7 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to New Frontier Health Corporation (NYSE:NFH). We will take a look at Yalla Group Limited (NYSE:YALA), Xenia Hotels & Resorts Inc (NYSE:XHR), Cornerstone Building Brands, Inc. (NYSE:CNR), Standard Motor Products, Inc. (NYSE:SMP), Gravity Co., LTD. (NASDAQ:GRVY), Zogenix, Inc. (NASDAQ:ZGNX), and Seacoast Banking Corporation of Florida (NASDAQ:SBCF). All of these stocks' market caps are similar to NFH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YALA,7,21747,7 XHR,9,29036,-1 CNR,22,84894,3 SMP,19,86241,4 GRVY,3,7704,-1 ZGNX,38,409878,0 SBCF,8,10417,1 Average,15.1,92845,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $170 million in NFH's case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Gravity Co., LTD. (NASDAQ:GRVY) is the least popular one with only 3 bullish hedge fund positions. New Frontier Health Corporation (NYSE:NFH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NFH is 50.3. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on NFH as the stock returned 11.1% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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