Is National Bank Holdings Corp (NBHC) Going to Burn These Hedge Funds?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data, though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Is National Bank Holdings Corp (NYSE:NBHC) ready to rally soon? The best stock pickers are betting on the stock. The number of long hedge fund bets inched up by 1 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Kronos Worldwide, Inc. (NYSE:KRO), Employers Holdings, Inc. (NYSE:EIG), and Meridian Bioscience, Inc. (NASDAQ:VIVO) to gather more data points.

At the moment there are several tools stock market investors have at their disposal to value stocks. Some of the less utilized tools are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can beat the broader indices by a significant amount (see the details here).

With all of this in mind, we’re going to take a look at the recent action encompassing National Bank Holdings Corp (NYSE:NBHC).

Hedge fund activity in National Bank Holdings Corp (NYSE:NBHC)

At the Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a small increase of 9% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Elliott Management, managed by Paul Singer, holds the most valuable position in National Bank Holdings Corp (NYSE:NBHC). Elliott Management has a $63.7 million position in the stock, comprising 1.2% of its 13F portfolio. On Elliott Management’s heels is Forest Hill Capital, managed by Mark Lee, which holds a $33.8 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Jim Simons’ Renaissance Technologies, Crispin Odey’s Odey Asset Management Group, and Neil Chriss’ Hutchin Hill Capital.

As one would reasonably expect, some big names were leading the bulls’ herd. Mendon Capital Advisors, managed by Anton Schutz, established the most outsized position in National Bank Holdings Corp (NYSE:NBHC). Mendon Capital Advisors had $3.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.5 million investment in the stock during the quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as National Bank Holdings Corp (NYSE:NBHC) but similarly valued. We will take a look at Kronos Worldwide, Inc. (NYSE:KRO), Employers Holdings, Inc. (NYSE:EIG), Meridian Bioscience, Inc. (NASDAQ:VIVO), and Revance Therapeutics Inc (NASDAQ:RVNC). This group of stocks’ market caps are similar to NBHC’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $40 million, which is lower than the $134 million in NBHC’s case. Employers Holdings, Inc. (NYSE:EIG) is the most popular stock in this table, while Kronos Worldwide, Inc. (NYSE:KRO) is the least popular one with only 6 bullish hedge fund positions. National Bank Holdings Corp (NYSE:NBHC) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard EIG might be a better candidate to consider a long position.