Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of NetSol Technologies Inc. (NASDAQ:NTWK).
NetSol Technologies Inc. (NASDAQ:NTWK) has experienced a decrease in hedge fund sentiment of late. NetSol Technologies Inc. (NASDAQ:NTWK) was in 3 hedge funds' portfolios at the end of September. The all time high for this statistics is 8. 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 for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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. Keeping this in mind let's go over the key hedge fund action surrounding NetSol Technologies Inc. (NASDAQ:NTWK).
How have hedgies been trading NetSol Technologies Inc. (NASDAQ:NTWK)?
At the end of September, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NTWK over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Michael M. Rothenberg's Moab Capital Partners has the number one position in NetSol Technologies Inc. (NASDAQ:NTWK), worth close to $2.3 million, accounting for 2% of its total 13F portfolio. On Moab Capital Partners's heels is Renaissance Technologies, which holds a $2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. In terms of the portfolio weights assigned to each position Moab Capital Partners allocated the biggest weight to NetSol Technologies Inc. (NASDAQ:NTWK), around 2.03% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.002 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: Arrowstreet Capital. 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 go over hedge fund activity in other stocks similar to NetSol Technologies Inc. (NASDAQ:NTWK). These stocks are Mannatech, Inc. (NASDAQ:MTEX), Oragenics Inc. (NYSE:OGEN), One Stop Systems, Inc. (NASDAQ:OSS), KLX Energy Services Holdings, Inc. (NASDAQ:KLXE), Caladrius Biosciences Inc (NASDAQ:CLBS), Sundial Growers Inc. (NASDAQ:SNDL), and Transenterix Inc (NYSE:TRXC). This group of stocks' market caps are closest to NTWK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTEX,1,841,0 OGEN,2,485,1 OSS,1,150,0 KLXE,7,2384,-5 CLBS,4,1988,3 SNDL,6,4036,3 TRXC,2,984,-4 Average,3.3,1553,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.3 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $4 million in NTWK's case. KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) is the most popular stock in this table. On the other hand Mannatech, Inc. (NASDAQ:MTEX) is the least popular one with only 1 bullish hedge fund positions. NetSol Technologies Inc. (NASDAQ:NTWK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NTWK is 31.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and surpassed the market again by 15.4 percentage points. Unfortunately NTWK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NTWK investors were disappointed as the stock returned 3.1% since the end of September (through 11/23) 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 most of these stocks already outperformed the market in 2020.
Get real-time email alerts: Follow Netsol Technologies Inc (NASDAQ:NTWK)
Disclosure: None. This article was originally published at Insider Monkey.