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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards National Retail Properties, Inc. (NYSE:NNN).
Is NNN a good stock to buy now? National Retail Properties, Inc. (NYSE:NNN) was in 16 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 23. NNN has seen a decrease in hedge fund interest lately. There were 17 hedge funds in our database with NNN holdings at the end of June. Our calculations also showed that NNN 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.
Donald Sussman of Paloma Partners
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. Keeping this in mind let's analyze the fresh hedge fund action encompassing National Retail Properties, Inc. (NYSE:NNN).
Do Hedge Funds Think NNN Is A Good Stock To Buy Now?
At Q3's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in NNN a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of National Retail Properties, Inc. (NYSE:NNN), with a stake worth $48.5 million reported as of the end of September. Trailing Citadel Investment Group was V3 Capital, which amassed a stake valued at $28.9 million. Two Sigma Advisors, Millennium Management, and Renaissance Technologies 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 V3 Capital allocated the biggest weight to National Retail Properties, Inc. (NYSE:NNN), around 6.62% of its 13F portfolio. MSDC Management is also relatively very bullish on the stock, dishing out 0.54 percent of its 13F equity portfolio to NNN.
Since National Retail Properties, Inc. (NYSE:NNN) has witnessed a decline in interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of fund managers that decided to sell off their positions entirely in the third quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management dumped the biggest position of the 750 funds monitored by Insider Monkey, valued at an estimated $11 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dropped about $4.3 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds in the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as National Retail Properties, Inc. (NYSE:NNN) but similarly valued. These stocks are Kilroy Realty Corp (NYSE:KRC), Credit Acceptance Corp. (NASDAQ:CACC), Smartsheet Inc. (NYSE:SMAR), Dada Nexus Limited (NASDAQ:DADA), Duck Creek Technologies, Inc. (NASDAQ:DCT), American Financial Group, Inc. (NYSE:AFG), and Ares Capital Corporation (NASDAQ:ARCC). This group of stocks' market caps are closest to NNN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRC,19,327802,-1 CACC,29,673470,6 SMAR,45,1661963,-2 DADA,17,113051,0 DCT,21,222561,21 AFG,27,278715,-1 ARCC,22,106925,3 Average,25.7,483498,3.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.7 hedge funds with bullish positions and the average amount invested in these stocks was $483 million. That figure was $123 million in NNN's case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand Dada Nexus Limited (NASDAQ:DADA) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks National Retail Properties, Inc. (NYSE:NNN) is even less popular than DADA. Our overall hedge fund sentiment score for NNN is 24.9. 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. Hedge funds clearly dropped the ball on NNN as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 NNN as the stock returned 17.5% since Q3 (through December 14th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.