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Were Hedge Funds Right About Warming Up To Navient Corp (NAVI)?

Abigail Fisher

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Navient Corp (NASDAQ:NAVI).

Navient Corp (NASDAQ:NAVI) was in 30 hedge funds' portfolios at the end of September. NAVI investors should pay attention to an increase in hedge fund interest of late. There were 26 hedge funds in our database with NAVI holdings at the end of the previous quarter. Our calculations also showed that NAVI 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.

5 Most Popular Stocks Among Hedge Funds

At the moment there are many signals shareholders have at their disposal to assess publicly traded companies. A duo of the most underrated signals are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outpace their index-focused peers by a solid amount (see the details here).

[caption id="attachment_324853" align="aligncenter" width="450"] Joshua Friedman of Canyon Capital Advisors[/caption]

Josh Friedman Canyon Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's check out the fresh hedge fund action encompassing Navient Corp (NASDAQ:NAVI).

What have hedge funds been doing with Navient Corp (NASDAQ:NAVI)?

At Q3's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the second quarter of 2019. On the other hand, there were a total of 27 hedge funds with a bullish position in NAVI a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

NAVI_dec2019

Among these funds, Canyon Capital Advisors held the most valuable stake in Navient Corp (NASDAQ:NAVI), which was worth $272.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $42 million worth of shares. D E Shaw, Omega Advisors, and Citadel Investment Group 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 Canyon Capital Advisors allocated the biggest weight to Navient Corp (NASDAQ:NAVI), around 5.88% of its portfolio. Omega Advisors is also relatively very bullish on the stock, earmarking 1.32 percent of its 13F equity portfolio to NAVI.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Interval Partners, managed by Gregg Moskowitz, initiated the biggest position in Navient Corp (NASDAQ:NAVI). Interval Partners had $7.7 million invested in the company at the end of the quarter. Renaissance Technologies also made a $5.6 million investment in the stock during the quarter. The following funds were also among the new NAVI investors: Lee Ainslie's Maverick Capital, Paul Marshall and Ian Wace's Marshall Wace, and Paul Tudor Jones's Tudor Investment Corp.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Navient Corp (NASDAQ:NAVI) but similarly valued. We will take a look at Apollo Commercial Real Est. Finance Inc (NYSE:ARI), Washington Federal Inc. (NASDAQ:WAFD), Colony Capital Inc (NYSE:CLNY), and Black Stone Minerals LP (NYSE:BSM). This group of stocks' market values are similar to NAVI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARI,9,55577,-4 WAFD,14,74488,5 CLNY,20,420255,4 BSM,7,7850,0 Average,12.5,139543,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $448 million in NAVI's case. Colony Capital Inc (NYSE:CLNY) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Navient Corp (NASDAQ:NAVI) is more popular among hedge funds. 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. Hedge funds were also right about betting on NAVI as the stock returned 12.1% during the first two months of Q4 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.

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

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