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In this article we will check out the progression of hedge fund sentiment towards Nielsen Holdings plc (NYSE:NLSN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is NLSN a good stock to buy? Hedge fund interest in Nielsen Holdings plc (NYSE:NLSN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NLSN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 Zions Bancorporation, National Association (NASDAQ:ZION), Commerce Bancshares, Inc. (NASDAQ:CBSH), and Store Capital Corporation (NYSE:STOR) to gather more data points.
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 115 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.
William Von Mueffling of Cantillon Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to review the latest hedge fund action regarding Nielsen Holdings plc (NYSE:NLSN).
Do Hedge Funds Think NLSN Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2020. By comparison, 33 hedge funds held shares or bullish call options in NLSN a year ago. 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, Windacre Partnership held the most valuable stake in Nielsen Holdings plc (NYSE:NLSN), which was worth $885.4 million at the end of the fourth quarter. On the second spot was Elliott Investment Management which amassed $417.5 million worth of shares. Ariel Investments, Cantillon Capital Management, and Brahman 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 Windacre Partnership allocated the biggest weight to Nielsen Holdings plc (NYSE:NLSN), around 22.03% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, dishing out 8.86 percent of its 13F equity portfolio to NLSN.
Seeing as Nielsen Holdings plc (NYSE:NLSN) has experienced declining sentiment from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of funds that elected to cut their entire stakes in the first quarter. Interestingly, Brandon Haley's Holocene Advisors dumped the largest stake of the "upper crust" of funds watched by Insider Monkey, totaling about $40.5 million in stock. Nancy Zimmerman and Gabriel Sunshine's fund, Bracebridge Capital, also dropped its stock, about $6.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Nielsen Holdings plc (NYSE:NLSN) but similarly valued. These stocks are Zions Bancorporation, National Association (NASDAQ:ZION), Commerce Bancshares, Inc. (NASDAQ:CBSH), Store Capital Corporation (NYSE:STOR), RealPage, Inc. (NASDAQ:RP), Albertsons Companies, Inc. (NYSE:ACI), Vereit Inc (NYSE:VER), and Robert Half International Inc. (NYSE:RHI). This group of stocks' market valuations are similar to NLSN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZION,24,193865,-4 CBSH,13,73163,-3 STOR,13,886150,1 RP,50,2495942,2 ACI,19,2807778,0 VER,27,664502,4 RHI,27,284866,0 Average,24.7,1058038,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $1058 million. That figure was $1982 million in NLSN's case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:CBSH) is the least popular one with only 13 bullish hedge fund positions. Nielsen Holdings plc (NYSE:NLSN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NLSN is 62.5. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately NLSN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NLSN were disappointed as the stock returned 0.9% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.