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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded NanoString Technologies Inc (NASDAQ:NSTG) based on those filings.
Is NSTG a good stock to buy now? Investors who are in the know were taking an optimistic view. The number of long hedge fund positions rose by 3 in recent months. NanoString Technologies Inc (NASDAQ:NSTG) was in 20 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. Our calculations also showed that NSTG 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Louis Bacon Moore of Moore Capital
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 check out the latest hedge fund action regarding NanoString Technologies Inc (NASDAQ:NSTG).
Do Hedge Funds Think NSTG Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the second quarter of 2020. On the other hand, there were a total of 18 hedge funds with a bullish position in NSTG a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in NanoString Technologies Inc (NASDAQ:NSTG) was held by OrbiMed Advisors, which reported holding $52.9 million worth of stock at the end of September. It was followed by Pura Vida Investments with a $42.8 million position. Other investors bullish on the company included Polar Capital, Marshall Wace LLP, and D E Shaw. In terms of the portfolio weights assigned to each position Pura Vida Investments allocated the biggest weight to NanoString Technologies Inc (NASDAQ:NSTG), around 2.21% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, earmarking 0.67 percent of its 13F equity portfolio to NSTG.
Now, some big names have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in NanoString Technologies Inc (NASDAQ:NSTG). Marshall Wace LLP had $12.9 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also initiated a $7.2 million position during the quarter. The other funds with new positions in the stock are Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, Ken Fisher's Fisher Asset Management, and Mika Toikka's AlphaCrest Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as NanoString Technologies Inc (NASDAQ:NSTG) but similarly valued. We will take a look at Turquoise Hill Resources Ltd (NYSE:TRQ), Range Resources Corp. (NYSE:RRC), Genworth Financial Inc (NYSE:GNW), Flagstar Bancorp Inc (NYSE:FBC), TransAlta Corporation (NYSE:TAC), Atlantic Union Bankshares Corporation (NASDAQ:AUB), and Repay Holdings Corporation (NASDAQ:RPAY). This group of stocks' market values match NSTG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRQ,9,305017,-4 RRC,23,324952,0 GNW,38,249188,2 FBC,25,157536,10 TAC,13,59596,1 AUB,9,34586,-3 RPAY,26,250330,8 Average,20.4,197315,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $209 million in NSTG's case. Genworth Financial Inc (NYSE:GNW) is the most popular stock in this table. On the other hand Turquoise Hill Resources Ltd (NYSE:TRQ) is the least popular one with only 9 bullish hedge fund positions. NanoString Technologies Inc (NASDAQ:NSTG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NSTG is 54.2. 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. A small number of hedge funds were also right about betting on NSTG as the stock returned 54.4% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.