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With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Newmark Group, Inc. (NASDAQ:NMRK).
Is NMRK a good stock to buy now? Newmark Group, Inc. (NASDAQ:NMRK) has experienced a decrease in hedge fund sentiment of late. Newmark Group, Inc. (NASDAQ:NMRK) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. Our calculations also showed that NMRK 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).
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 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 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 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.
John Levin of Levin Capital Strategies
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. Now we're going to review the recent hedge fund action regarding Newmark Group, Inc. (NASDAQ:NMRK).
Do Hedge Funds Think NMRK Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NMRK over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Cardinal Capital held the most valuable stake in Newmark Group, Inc. (NASDAQ:NMRK), which was worth $18 million at the end of the third quarter. On the second spot was Empyrean Capital Partners which amassed $17.8 million worth of shares. EJF Capital, Birch Run Capital, 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 Birch Run Capital allocated the biggest weight to Newmark Group, Inc. (NASDAQ:NMRK), around 5.42% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, designating 1.2 percent of its 13F equity portfolio to NMRK.
Because Newmark Group, Inc. (NASDAQ:NMRK) has faced a decline in interest from the smart money, it's safe to say that there lies a certain "tier" of fund managers who sold off their positions entirely last quarter. At the top of the heap, Mark Coe's Intrinsic Edge Capital dumped the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $2.8 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund sold off about $0.3 million worth. These transactions are important to note, as total hedge fund interest fell by 5 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Newmark Group, Inc. (NASDAQ:NMRK) but similarly valued. We will take a look at Triumph Bancorp Inc (NASDAQ:TBK), Puxin Limited (NYSE:NEW), Forterra, Inc. (NASDAQ:FRTA), Stock Yards Bancorp, Inc. (NASDAQ:SYBT), Raven Industries, Inc. (NASDAQ:RAVN), Ingles Markets, Incorporated (NASDAQ:IMKTA), and Bright Scholar Education Holdings Limited (NYSE:BEDU). This group of stocks' market caps match NMRK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TBK,5,33554,-2 NEW,7,10525,-1 FRTA,27,128985,14 SYBT,9,10163,1 RAVN,16,79410,3 IMKTA,16,71020,0 BEDU,7,72807,0 Average,12.4,58066,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.4 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $89 million in NMRK's case. Forterra, Inc. (NASDAQ:FRTA) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 5 bullish hedge fund positions. Newmark Group, Inc. (NASDAQ:NMRK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NMRK is 55.6. 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. Hedge funds were also right about betting on NMRK as the stock returned 67.8% since the end of Q3 (through 12/14) 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.