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Hedge Fund Sentiment Is Stagnant On National Interstate Corporation (NATL)

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think of small cap stocks. In this article, we take a closer look at National Interstate Corporation (NASDAQ:NATL) from the perspective of those elite funds.

National Interstate Corporation (NASDAQ:NATL) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare NATL to other stocks including Green Brick Partners Inc (NASDAQ:GRBK), Western Asset Mortgage Capital Corp (NYSE:WMC), and Getty Realty Corp. (NYSE:GTY) to get a better sense of its popularity.

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If you’d ask most investors, hedge funds are viewed as worthless, old investment tools of years past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the crème de la crème of this group, around 700 funds. These hedge fund managers shepherd the majority of the smart money’s total asset base, and by tracking their best equity investments, Insider Monkey has formulated a few investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to check out the new action regarding National Interstate Corporation (NASDAQ:NATL).

What does the smart money think about National Interstate Corporation (NASDAQ:NATL)?

At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Rutabaga Capital Management, managed by Peter Schliemann, holds the largest position in National Interstate Corporation (NASDAQ:NATL). Rutabaga Capital Management has an $23.6 million position in the stock, comprising 2.9% of its 13F portfolio. Coming in second is Carlson Capital, managed by Clint Carlson, which holds an $12 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism consist of Jacob Gottlieb’s Visium Asset Management, Mario Gabelli’s GAMCO Investors and Jim Simons’s Renaissance Technologies.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s go over hedge fund activity in other stocks similar to National Interstate Corporation (NASDAQ:NATL). We will take a look at Green Brick Partners Inc (NASDAQ:GRBK), Western Asset Mortgage Capital Corp (NYSE:WMC), Getty Realty Corp. (NYSE:GTY), and Cedar Realty Trust Inc (NYSE:CDR). All of these stocks’ market caps are similar to NATL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GRBK 10 375709 -2
WMC 4 1505 -2
GTY 5 15079 -5
CDR 9 17751 -2

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $48 million in NATL’s case. Green Brick Partners Inc (NASDAQ:GRBK) is the most popular stock in this table. On the other hand, Western Asset Mortgage Capital Corp (NYSE:WMC) is the least popular one. Even though National Interstate Corporation (NASDAQ:NATL) is not the least popular stock in this group, it has not caught much attention from investors. This may indicate that this stock is not a good choice for investment, which is why we’d rather focus on analyzing stocks that hedge funds are collectively the fondest of, in this group, a better alternative might be GRBK.

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