NutriSystem Inc. (NTRI): Hedge Funds’ Holdings Are Losing Weight

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Is NutriSystem Inc. (NASDAQ:NTRI) worth your attention right now? Prominent investors are in a pessimistic mood. The number of long hedge fund positions shrank by 4 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 Babcock & Wilcox Enterprises Inc (NYSE:BW), TCP Capital Corp (NASDAQ:TCPC), and Vitamin Shoppe Inc (NYSE:VSI) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What have hedge funds been doing with NutriSystem Inc. (NASDAQ:NTRI)?

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 17% drop from the previous quarter. Hedge fund ownership has fallen by 30% over the last 4 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the largest position in NutriSystem Inc. (NASDAQ:NTRI). Renaissance Technologies has a $75.2 million position in the stock. On Renaissance Technologies’ heels is Principal Global Investors’ Columbus Circle Investors, with a $14.3 million position. Other peers with similar optimism contain Richard Driehaus’ Driehaus Capital, Philippe Laffont’s Coatue Management and Ken Grossman and Glen Schneider’s SG Capital Management.

Due to the fact that NutriSystem Inc. (NASDAQ:NTRI) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest stake of all the hedgies watched by Insider Monkey, totaling an estimated $2.4 million in call options, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund said goodbye to about $0.5 million worth of shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to NutriSystem Inc. (NASDAQ:NTRI). These stocks are Babcock & Wilcox Enterprises Inc (NYSE:BW), TCP Capital Corp (NASDAQ:TCPC), Vitamin Shoppe Inc (NYSE:VSI), and Weight Watchers International, Inc. (NYSE:WTW). This group of stocks’ market caps match NTRI’s market cap.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $153 million in NTRI’s case. Babcock & Wilcox Enterprises Inc (NYSE:BW) is the most popular stock in this table. On the other hand TCP Capital Corp (NASDAQ:TCPC) is the least popular one with only 6 bullish hedge fund positions. NutriSystem Inc. (NASDAQ:NTRI) 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 pouring money into. In this regard BW might be a better candidate to consider a long position in.

Disclosure: None