We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Norfolk Southern Corp. (NYSE:NSC) based on that data.
Norfolk Southern Corp. (NYSE:NSC) was in 46 hedge funds' portfolios at the end of September. NSC has experienced a decrease in activity from the world's largest hedge funds recently. There were 54 hedge funds in our database with NSC holdings at the end of the previous quarter. Our calculations also showed that NSC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings, see the below for Q2 rankings). Video: Click the image to 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 hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_256989" align="aligncenter" width="450"] Dmitry Balyasny of Balyasny Asset Managemnet[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to analyze the recent hedge fund action regarding Norfolk Southern Corp. (NYSE:NSC).
How have hedgies been trading Norfolk Southern Corp. (NYSE:NSC)?
At the end of the third quarter, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. By comparison, 49 hedge funds held shares or bullish call options in NSC 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.
The largest stake in Norfolk Southern Corp. (NYSE:NSC) was held by Soroban Capital Partners, which reported holding $475.2 million worth of stock at the end of September. It was followed by Palestra Capital Management with a $167.4 million position. Other investors bullish on the company included Citadel Investment Group, Balyasny Asset Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Lodge Hill Capital allocated the biggest weight to Norfolk Southern Corp. (NYSE:NSC), around 7.25% of its portfolio. Soroban Capital Partners is also relatively very bullish on the stock, designating 6.69 percent of its 13F equity portfolio to NSC.
Since Norfolk Southern Corp. (NYSE:NSC) has experienced a decline in interest from hedge fund managers, it's safe to say that there was a specific group of hedgies who were dropping their entire stakes by the end of the third quarter. Intriguingly, Alexander Mitchell's Scopus Asset Management sold off the largest position of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $69.2 million in stock. Aaron Cowen's fund, Suvretta Capital Management, also sold off its stock, about $42.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 8 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to Norfolk Southern Corp. (NYSE:NSC). These stocks are Prudential Public Limited Company (NYSE:PUK), Micron Technology, Inc. (NASDAQ:MU), Schlumberger Limited. (NYSE:SLB), and Bank of Montreal (NYSE:BMO). This group of stocks' market valuations are similar to NSC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PUK,11,58421,6 MU,67,3620548,5 SLB,49,1246666,8 BMO,14,393078,1 Average,35.25,1329678,5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $1330 million. That figure was $1947 million in NSC's case. Micron Technology, Inc. (NASDAQ:MU) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 11 bullish hedge fund positions. Norfolk Southern Corp. (NYSE:NSC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on NSC, though not to the same extent, as the stock returned 8.1% during the fourth quarter (through 11/22) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.