The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article we look at what those investors think of NetSol Technologies Inc. (NASDAQ:NTWK).
NetSol Technologies Inc. (NASDAQ:NTWK) shareholders have witnessed a decrease in activity from the world's largest hedge funds in recent months. NTWK was in 5 hedge funds' portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with NTWK holdings at the end of the previous quarter. Our calculations also showed that NTWK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_673876" align="aligncenter" width="1613"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a look at the key hedge fund action regarding NetSol Technologies Inc. (NASDAQ:NTWK).
Hedge fund activity in NetSol Technologies Inc. (NASDAQ:NTWK)
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in NTWK over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in NetSol Technologies Inc. (NASDAQ:NTWK) was held by Moab Capital Partners, which reported holding $4.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $2.9 million position. Other investors bullish on the company included GLG Partners, Two Sigma Advisors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Moab Capital Partners allocated the biggest weight to NetSol Technologies Inc. (NASDAQ:NTWK), around 1.88% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0025 percent of its 13F equity portfolio to NTWK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified NTWK as a viable investment and initiated a position in the stock.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as NetSol Technologies Inc. (NASDAQ:NTWK) but similarly valued. We will take a look at Liquidia Technologies, Inc. (NASDAQ:LQDA), United Bancshares Inc. (NASDAQ:UBOH), Aware, Inc. (NASDAQ:AWRE), and Cocrystal Pharma, Inc. (NASDAQ:COCP). This group of stocks' market valuations resemble NTWK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LQDA,6,5608,0 UBOH,1,5843,0 AWRE,2,2665,-1 COCP,2,48,1 Average,2.75,3541,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $8 million in NTWK's case. Liquidia Technologies, Inc. (NASDAQ:LQDA) is the most popular stock in this table. On the other hand United Bancshares Inc. (NASDAQ:UBOH) is the least popular one with only 1 bullish hedge fund positions. NetSol Technologies Inc. (NASDAQ:NTWK) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NTWK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NTWK were disappointed as the stock returned -31.2% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.