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Were Hedge Funds Wrong About Northern Trust Corporation (NTRS)?

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·6 min read
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  • BCPC
  • NTRS
  • NTRSO

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Northern Trust Corporation (NASDAQ:NTRS).

Northern Trust Corporation (NASDAQ:NTRS) shareholders have witnessed an increase in enthusiasm from smart money lately. Northern Trust Corporation (NASDAQ:NTRS) was in 35 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 37. There were 27 hedge funds in our database with NTRS holdings at the end of March. Our calculations also showed that NTRS isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

To most investors, hedge funds are assumed to be worthless, outdated financial tools of years past. While there are more than 8000 funds with their doors open at present, We look at the upper echelon of this group, about 850 funds. These hedge fund managers handle most of the hedge fund industry's total asset base, and by paying attention to their best equity investments, Insider Monkey has determined a number of investment strategies that have historically defeated the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ken Griffin
Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Now let's check out the fresh hedge fund action surrounding Northern Trust Corporation (NASDAQ:NTRS).

What have hedge funds been doing with Northern Trust Corporation (NASDAQ:NTRS)?

At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NTRS over the last 20 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is NTRS A Good Stock To Buy?
Is NTRS A Good Stock To Buy?

More specifically, Ariel Investments was the largest shareholder of Northern Trust Corporation (NASDAQ:NTRS), with a stake worth $143.5 million reported as of the end of June. Trailing Ariel Investments was Marshall Wace LLP, which amassed a stake valued at $46.1 million. Citadel Investment Group, Millennium Management, and AQR Capital 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 Fairpointe Capital allocated the biggest weight to Northern Trust Corporation (NASDAQ:NTRS), around 2.81% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, setting aside 2.19 percent of its 13F equity portfolio to NTRS.

As aggregate interest increased, specific money managers have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, created the largest position in Northern Trust Corporation (NASDAQ:NTRS). Alyeska Investment Group had $28.4 million invested in the company at the end of the quarter. Thyra Zerhusen's Fairpointe Capital also made a $19.3 million investment in the stock during the quarter. The other funds with brand new NTRS positions are Seth Cogswell's Running Oak Capital, Greg Eisner's Engineers Gate Manager, and David Rodriguez-Fraile's BlueMar Capital Management.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Northern Trust Corporation (NASDAQ:NTRS) but similarly valued. We will take a look at Restaurant Brands International Inc (NYSE:QSR), Yandex NV (NASDAQ:YNDX), Peloton Interactive, Inc. (NASDAQ:PTON), CGI Inc. (NYSE:GIB), Fox Corporation (NASDAQ:FOX), Fox Corporation (NASDAQ:FOXA), and Maxim Integrated Products Inc. (NASDAQ:MXIM). This group of stocks' market caps match NTRS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QSR,44,2868475,3 YNDX,44,1403652,9 PTON,50,2109831,14 GIB,19,259686,1 FOX,20,566122,-2 FOXA,35,1611691,-3 MXIM,33,323780,3 Average,35,1306177,3.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1306 million. That figure was $450 million in NTRS's case. Peloton Interactive, Inc. (NASDAQ:PTON) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 19 bullish hedge fund positions. Northern Trust Corporation (NASDAQ:NTRS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NTRS is 64.2. 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. 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 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 23% in 2020 through October 30th and surpassed the market again by 20.1 percentage points. Unfortunately NTRS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NTRS investors were disappointed as the stock returned -0.5% since the end of June (through 10/30) 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 most of these stocks already outperformed the market in 2020.

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

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