A market surge in the first quarter, spurred by easing global macroeconomic concerns and Powell's pivot ended up having a positive impact on the markets and many hedge funds as a result. The stocks of smaller companies which were especially hard hit during the fourth quarter slightly outperformed the market during the first quarter. Unfortunately, Trump is unpredictable and volatility returned in the second quarter and smaller-cap stocks went back to selling off. We finished compiling the latest 13F filings to get an idea about what hedge funds are thinking about the overall market as well as individual stocks. In this article we will study the hedge fund sentiment to see how those concerns affected their ownership of Northern Trust Corporation (NASDAQ:NTRS) during the quarter.
Northern Trust Corporation (NASDAQ:NTRS) was in 34 hedge funds' portfolios at the end of the first quarter of 2019. NTRS has experienced a decrease in enthusiasm from smart money recently. There were 37 hedge funds in our database with NTRS holdings at the end of the previous quarter. Our calculations also showed that ntrs isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We're going to check out the recent hedge fund action encompassing Northern Trust Corporation (NASDAQ:NTRS).
What have hedge funds been doing with Northern Trust Corporation (NASDAQ:NTRS)?
Heading into the second quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in NTRS a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Ariel Investments held the most valuable stake in Northern Trust Corporation (NASDAQ:NTRS), which was worth $157.6 million at the end of the first quarter. On the second spot was Millennium Management which amassed $114.3 million worth of shares. Moreover, D E Shaw, Carlson Capital, and GAMCO Investors were also bullish on Northern Trust Corporation (NASDAQ:NTRS), allocating a large percentage of their portfolios to this stock.
Because Northern Trust Corporation (NASDAQ:NTRS) has faced bearish sentiment from the smart money, it's easy to see that there exists a select few hedgies that slashed their full holdings in the third quarter. Intriguingly, Daniel Johnson's Gillson Capital dropped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, worth an estimated $15.7 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund said goodbye to about $7.6 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds in the third quarter.
Let's now review hedge fund activity in other stocks similar to Northern Trust Corporation (NASDAQ:NTRS). We will take a look at Kellogg Company (NYSE:K), Weyerhaeuser Co. (NYSE:WY), Microchip Technology Incorporated (NASDAQ:MCHP), and Chipotle Mexican Grill, Inc. (NYSE:CMG). This group of stocks' market valuations resemble NTRS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position K,26,607117,-1 WY,25,374714,-12 MCHP,32,585215,2 CMG,35,3506651,-3 Average,29.5,1268424,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $1268 million. That figure was $606 million in NTRS's case. Chipotle Mexican Grill, Inc. (NYSE:CMG) is the most popular stock in this table. On the other hand Weyerhaeuser Co. (NYSE:WY) is the least popular one with only 25 bullish hedge fund positions. Northern Trust Corporation (NASDAQ:NTRS) 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately NTRS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NTRS were disappointed as the stock returned -3% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.