Is NLSN A Good Stock To Buy According To Hedge Funds?
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? Prominent investors were cutting their exposure. The number of long hedge fund positions dropped by 1 lately. Nielsen Holdings plc (NYSE:NLSN) was in 30 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 35. Our calculations also showed that NLSN 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 31 hedge funds in our database with NLSN 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.
Paul Singer of Elliott Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now let's review the key hedge fund action regarding Nielsen Holdings plc (NYSE:NLSN).
Do Hedge Funds Think NLSN Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NLSN over the last 21 quarters. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Nielsen Holdings plc (NYSE:NLSN) was held by Windacre Partnership, which reported holding $501.1 million worth of stock at the end of September. It was followed by Elliott Investment Management with a $235.4 million position. Other investors bullish on the company included Ariel Investments, HBK Investments, and D E Shaw. In terms of the portfolio weights assigned to each position Windacre Partnership allocated the biggest weight to Nielsen Holdings plc (NYSE:NLSN), around 15.27% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, dishing out 3.25 percent of its 13F equity portfolio to NLSN.
Judging by the fact that Nielsen Holdings plc (NYSE:NLSN) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there were a few money managers that elected to cut their positions entirely in the third quarter. It's worth mentioning that Derek C. Schrier's Indaba Capital Management cut the largest stake of the "upper crust" of funds monitored by Insider Monkey, totaling about $26.7 million in stock. Robert Pitts's fund, Steadfast Capital Management, also sold off its stock, about $5.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to Nielsen Holdings plc (NYSE:NLSN). We will take a look at CoreSite Realty Corp (NYSE:COR), Apartment Investment and Management Co. (NYSE:AIV), Nomad Foods Limited (NYSE:NOMD), Oshkosh Corporation (NYSE:OSK), Woodward Inc (NASDAQ:WWD), The Wendy's Company (NASDAQ:WEN), and The Middleby Corporation (NASDAQ:MIDD). This group of stocks' market valuations are closest to NLSN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COR,19,163584,-2 AIV,25,484646,1 NOMD,31,381203,-3 OSK,29,203174,2 WWD,24,506782,3 WEN,27,1080122,-5 MIDD,30,282005,4 Average,26.4,443074,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $443 million. That figure was $944 million in NLSN's case. Nomad Foods Limited (NYSE:NOMD) is the most popular stock in this table. On the other hand CoreSite Realty Corp (NYSE:COR) is the least popular one with only 19 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 75.5. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on NLSN as the stock returned 42.2% since the end of Q3 (through 12/18) 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.
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