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Nielsen Holdings plc (NLSN): Are Hedge Funds Right About This Stock?

Abigail Fisher

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Nielsen Holdings plc (NYSE:NLSN)?

Is Nielsen Holdings plc (NYSE:NLSN) the right investment to pursue these days? The best stock pickers are betting on the stock. The number of bullish hedge fund bets increased by 4 recently. Our calculations also showed that NLSN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). NLSN was in 33 hedge funds' portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with NLSN positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

[caption id="attachment_26345" align="aligncenter" width="393"] Paul Singer of Elliott Management[/caption]

Paul Singer ELLIOTT MANAGEMENT

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. Now we're going to analyze the key hedge fund action regarding Nielsen Holdings plc (NYSE:NLSN).

How have hedgies been trading Nielsen Holdings plc (NYSE:NLSN)?

Heading into the second quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NLSN over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, Windacre Partnership held the most valuable stake in Nielsen Holdings plc (NYSE:NLSN), which was worth $355.1 million at the end of the third quarter. On the second spot was Elliott Management which amassed $208.2 million worth of shares. Ariel Investments, HBK Investments, and HBK Investments 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 15.84% of its 13F portfolio. Elliott Management is also relatively very bullish on the stock, dishing out 3.86 percent of its 13F equity portfolio to NLSN.

As industrywide interest jumped, specific money managers were leading the bulls' herd. HBK Investments, managed by David Costen Haley, assembled the largest position in Nielsen Holdings plc (NYSE:NLSN). HBK Investments had $12.5 million invested in the company at the end of the quarter. Robert Pitts's Steadfast Capital Management also initiated a $10.9 million position during the quarter. The other funds with brand new NLSN positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Eli Cohen's Crescent Park Management, and Andrew Kurita's Kettle Hill Capital Management.

Let's go over hedge fund activity in other stocks similar to Nielsen Holdings plc (NYSE:NLSN). We will take a look at MKS Instruments, Inc. (NASDAQ:MKSI), The Boston Beer Company Inc (NYSE:SAM), Berry Global Group Inc (NYSE:BERY), and PLDT Inc. (NYSE:PHI). All of these stocks' market caps are similar to NLSN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MKSI,27,296258,-1 SAM,24,557916,-2 BERY,34,1206553,-13 PHI,7,74090,0 Average,23,533704,-4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $534 million. That figure was $763 million in NLSN's case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 7 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. 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 NLSN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on NLSN were disappointed as the stock returned 10.8% 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.

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Disclosure: None. This article was originally published at Insider Monkey.

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