Is NVT Stock A Buy or Sell?
In this article we are going to use hedge fund sentiment as a tool and determine whether nVent Electric plc (NYSE:NVT) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is NVT stock a buy? Hedge funds were selling. The number of bullish hedge fund bets decreased by 4 lately. nVent Electric plc (NYSE:NVT) was in 30 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 34. Our calculations also showed that NVT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 34 hedge funds in our database with NVT holdings at the end of September.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
John Levin of Levin Capital Strategies
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. With all of this in mind we're going to take a peek at the new hedge fund action encompassing nVent Electric plc (NYSE:NVT).
Do Hedge Funds Think NVT Is A Good Stock To Buy Now?
At Q4's end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in NVT a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in nVent Electric plc (NYSE:NVT), which was worth $52 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $44 million worth of shares. Balyasny Asset Management, Adage Capital Management, and Arrowstreet Capital 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 Sessa Capital allocated the biggest weight to nVent Electric plc (NYSE:NVT), around 1.64% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, earmarking 1.47 percent of its 13F equity portfolio to NVT.
Judging by the fact that nVent Electric plc (NYSE:NVT) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers who were dropping their entire stakes last quarter. At the top of the heap, Nelson Peltz's Trian Partners dropped the biggest position of the "upper crust" of funds watched by Insider Monkey, comprising about $103.1 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also cut its stock, about $11.1 million worth. These transactions are important to note, as total hedge fund interest fell by 4 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as nVent Electric plc (NYSE:NVT) but similarly valued. These stocks are National Beverage Corp. (NASDAQ:FIZZ), Artisan Partners Asset Management Inc (NYSE:APAM), The Ensign Group, Inc. (NASDAQ:ENSG), Scientific Games Corp (NASDAQ:SGMS), Root, Inc. (NASDAQ:ROOT), Switch, Inc. (NYSE:SWCH), and Valley National Bancorp (NASDAQ:VLY). This group of stocks' market values match NVT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FIZZ,21,340385,-2 APAM,21,317073,-5 ENSG,19,114639,0 SGMS,23,808963,-2 ROOT,25,452486,25 SWCH,18,274980,-4 VLY,17,73031,-4 Average,20.6,340222,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $340 million. That figure was $343 million in NVT's case. Root, Inc. (NASDAQ:ROOT) is the most popular stock in this table. On the other hand Valley National Bancorp (NASDAQ:VLY) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks nVent Electric plc (NYSE:NVT) is more popular among hedge funds. Our overall hedge fund sentiment score for NVT is 77.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.2% in 2021 through April 12th but still managed to beat the market by 1.5 percentage points. Hedge funds were also right about betting on NVT as the stock returned 23.5% since the end of December (through 4/12) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
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