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Nucor Corporation (NUE): Hedge Funds Sticking Around

Abigail Fisher

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 March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Nucor Corporation (NYSE:NUE) based on those filings.

Hedge fund interest in Nucor Corporation (NYSE:NUE) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Baker Hughes Company (NYSE:BKR), UDR, Inc. (NYSE:UDR), and SK Telecom Co., Ltd. (NYSE:SKM) to gather more data points. Our calculations also showed that NUE isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26388" align="aligncenter" width="397"] Lee Ainslie of Maverick Capital[/caption]

Lee Ainslie MAVERICK CAPITAL

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the fresh hedge fund action encompassing Nucor Corporation (NYSE:NUE).

How are hedge funds trading Nucor Corporation (NYSE:NUE)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NUE over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Nucor Corporation (NYSE:NUE), which was worth $17.7 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $15 million worth of shares. AQR Capital Management, Adage Capital Management, and Millennium Management 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 Arjuna Capital allocated the biggest weight to Nucor Corporation (NYSE:NUE), around 0.3% of its 13F portfolio. Elkhorn Partners is also relatively very bullish on the stock, earmarking 0.25 percent of its 13F equity portfolio to NUE.

Because Nucor Corporation (NYSE:NUE) has faced bearish sentiment from the smart money, it's easy to see that there were a few hedgies who sold off their entire stakes by the end of the first quarter. It's worth mentioning that Kamyar Khajavi's MIK Capital sold off the largest position of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $8 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund cut about $2.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks similar to Nucor Corporation (NYSE:NUE). We will take a look at Baker Hughes Company (NYSE:BKR), UDR, Inc. (NYSE:UDR), SK Telecom Co., Ltd. (NYSE:SKM), and Quest Diagnostics Incorporated (NYSE:DGX). This group of stocks' market valuations resemble NUE's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BKR,30,281145,-7 UDR,19,249574,-2 SKM,5,117014,-1 DGX,38,383257,7 Average,23,257748,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $96 million in NUE's case. Quest Diagnostics Incorporated (NYSE:DGX) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 5 bullish hedge fund positions. Nucor Corporation (NYSE:NUE) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately NUE wasn't nearly as popular as these 10 stocks and hedge funds that were betting on NUE were disappointed as the stock returned 17.3% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.

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