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Were Hedge Funds Right About Souring On Nucor Corporation (NUE)?

Asma UL Husna

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of Nucor Corporation (NYSE:NUE).

Is Nucor Corporation (NYSE:NUE) a buy here? The smart money is becoming less hopeful. The number of bullish hedge fund bets fell by 5 recently. Our calculations also showed that NUE isn't among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jonathan Barrett Luminus Management

We're going to take a look at the latest hedge fund action regarding Nucor Corporation (NYSE:NUE).

What have hedge funds been doing with Nucor Corporation (NYSE:NUE)?

Heading into the first quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NUE over the last 14 quarters. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

NUE_mar2019

Among these funds, Millennium Management held the most valuable stake in Nucor Corporation (NYSE:NUE), which was worth $107.4 million at the end of the third quarter. On the second spot was Luminus Management which amassed $66.6 million worth of shares. Moreover, East Side Capital (RR Partners), Two Sigma Advisors, and AQR Capital Management were also bullish on Nucor Corporation (NYSE:NUE), allocating a large percentage of their portfolios to this stock.

Due to the fact that Nucor Corporation (NYSE:NUE) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few fund managers that elected to cut their positions entirely by the end of the third quarter. Intriguingly, D. E. Shaw's D E Shaw sold off the largest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $6.5 million in stock. Bruce Kovner's fund, Caxton Associates LP, also sold off its stock, about $6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Nucor Corporation (NYSE:NUE) but similarly valued. These stocks are ResMed Inc. (NYSE:RMD), Aptiv PLC (NYSE:APTV), Essex Property Trust Inc (NYSE:ESS), and Church & Dwight Co., Inc. (NYSE:CHD). This group of stocks' market caps are similar to NUE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RMD,22,394216,-2 APTV,44,715224,1 ESS,19,432405,3 CHD,30,222985,10 Average,28.75,441208,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $441 million. That figure was $393 million in NUE's case. Aptiv PLC (NYSE:APTV) is the most popular stock in this table. On the other hand Essex Property Trust Inc (NYSE:ESS) is the least popular one with only 19 bullish hedge fund positions. Nucor Corporation (NYSE:NUE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately NUE wasn't in this group. Hedge funds that bet on NUE were disappointed as the stock returned 13% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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