Did Hedge Funds Drop The Ball On Newmark Group, Inc. (NMRK) ?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Newmark Group, Inc. (NASDAQ:NMRK)? The smart money sentiment can provide an answer to this question.

Newmark Group, Inc. (NASDAQ:NMRK) investors should be aware of an increase in support from the world’s most elite money managers in recent months. NMRK was in 19 hedge funds’ portfolios at the end of the third quarter of 2019. There were 16 hedge funds in our database with NMRK positions at the end of the previous quarter. Our calculations also showed that NMRK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


John Paulson of Paulson & Co

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the recent hedge fund action surrounding Newmark Group, Inc. (NASDAQ:NMRK).

What have hedge funds been doing with Newmark Group, Inc. (NASDAQ:NMRK)?

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NMRK over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Newmark Group, Inc. (NASDAQ:NMRK) was held by EJF Capital, which reported holding $27.3 million worth of stock at the end of September. It was followed by Cardinal Capital with a $22.9 million position. Other investors bullish on the company included Sessa Capital, Paulson & Co, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Gratia Capital allocated the biggest weight to Newmark Group, Inc. (NASDAQ:NMRK), around 4.6% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, dishing out 3.72 percent of its 13F equity portfolio to NMRK.

Consequently, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Newmark Group, Inc. (NASDAQ:NMRK). Arrowstreet Capital had $3.3 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also initiated a $0.9 million position during the quarter. The other funds with brand new NMRK positions are Paul Marshall and Ian Wace’s Marshall Wace, Steve Pei’s Gratia Capital, and Jonathan Soros’s JS Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Newmark Group, Inc. (NASDAQ:NMRK) but similarly valued. We will take a look at NBT Bancorp Inc. (NASDAQ:NBTB), IAMGOLD Corporation (NYSE:IAG), Redwood Trust, Inc. (NYSE:RWT), and Owens-Illinois Inc (NYSE:OI). This group of stocks’ market valuations match NMRK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NBTB 6 7606 -2
IAG 13 148737 -2
RWT 15 119122 2
OI 22 355523 1
Average 14 157747 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $111 million in NMRK’s case. Owens-Illinois Inc (NYSE:OI) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 6 bullish hedge fund positions. Newmark Group, Inc. (NASDAQ:NMRK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on NMRK as the stock returned 45.2% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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