We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Nu Skin Enterprises, Inc. (NYSE:NUS).
Nu Skin Enterprises, Inc. (NYSE:NUS) was in 23 hedge funds' portfolios at the end of March. NUS investors should pay attention to a decrease in support from the world's most elite money managers recently. There were 24 hedge funds in our database with NUS positions at the end of the previous quarter. Our calculations also showed that nus isn't among the 30 most popular stocks among hedge funds.
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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a glance at the fresh hedge fund action encompassing Nu Skin Enterprises, Inc. (NYSE:NUS).
Hedge fund activity in Nu Skin Enterprises, Inc. (NYSE:NUS)
At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in NUS a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Nu Skin Enterprises, Inc. (NYSE:NUS), with a stake worth $60 million reported as of the end of March. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $42.6 million. D E Shaw, Millennium Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Since Nu Skin Enterprises, Inc. (NYSE:NUS) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that slashed their full holdings in the third quarter. Intriguingly, Ken Grossman and Glen Schneider's SG Capital Management cut the largest position of all the hedgies watched by Insider Monkey, totaling an estimated $11.3 million in stock, and George McCabe's Portolan Capital Management was right behind this move, as the fund dropped about $3.7 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Nu Skin Enterprises, Inc. (NYSE:NUS) but similarly valued. These stocks are Avis Budget Group Inc. (NASDAQ:CAR), Stantec Inc. (NYSE:STN), Barnes Group Inc. (NYSE:B), and Rexnord Corp (NYSE:RXN). This group of stocks' market values resemble NUS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CAR,28,1063531,-1 STN,5,68587,1 B,18,43588,4 RXN,21,171232,2 Average,18,336735,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $337 million. That figure was $205 million in NUS's case. Avis Budget Group Inc. (NASDAQ:CAR) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 5 bullish hedge fund positions. Nu Skin Enterprises, Inc. (NYSE:NUS) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on NUS, though not to the same extent, as the stock returned 1.5% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.