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Did Hedge Funds Make The Right Call On Navient Corp (NAVI) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Navient Corp (NASDAQ:NAVI) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is Navient Corp (NASDAQ:NAVI) worth your attention right now? Money managers were becoming less hopeful. The number of long hedge fund positions fell by 5 in recent months. Our calculations also showed that NAVI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). NAVI was in 33 hedge funds’ portfolios at the end of March. There were 38 hedge funds in our database with NAVI holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most traders, hedge funds are assumed to be unimportant, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the aristocrats of this club, approximately 850 funds. These investment experts control the lion’s share of all hedge funds’ total asset base, and by tracking their unrivaled equity investments, Insider Monkey has come up with a few investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Groupon, Alibaba, is GRPN a good stock to buy, is BABA a good stock to buy, Leon Cooperman, Omega Advisors,

Leon Cooperman of Omega Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the recent hedge fund action surrounding Navient Corp (NASDAQ:NAVI).

What have hedge funds been doing with Navient Corp (NASDAQ:NAVI)?

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in NAVI over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of Navient Corp (NASDAQ:NAVI), with a stake worth $33 million reported as of the end of September. Trailing Arrowstreet Capital was Citadel Investment Group, which amassed a stake valued at $31.3 million. Omega Advisors, D E Shaw, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Omega Advisors allocated the biggest weight to Navient Corp (NASDAQ:NAVI), around 2.9% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, designating 0.47 percent of its 13F equity portfolio to NAVI.

Seeing as Navient Corp (NASDAQ:NAVI) has witnessed a decline in interest from the smart money, we can see that there was a specific group of money managers that decided to sell off their full holdings heading into Q4. Interestingly, Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors cut the biggest position of all the hedgies tracked by Insider Monkey, comprising an estimated $278.3 million in stock. Ryan Caldwell’s fund, Chiron Investment Management, also said goodbye to its stock, about $10.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Navient Corp (NASDAQ:NAVI) but similarly valued. We will take a look at First Financial Bancorp (NASDAQ:FFBC), The Geo Group, Inc. (NYSE:GEO), The Chemours Company (NYSE:CC), and Monro Inc (NASDAQ:MNRO). This group of stocks’ market values are closest to NAVI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FFBC 8 8121 3
GEO 14 83253 -8
CC 32 239323 3
MNRO 14 87142 -4
Average 17 104460 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $153 million in NAVI’s case. The Chemours Company (NYSE:CC) is the most popular stock in this table. On the other hand First Financial Bancorp (NASDAQ:FFBC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Navient Corp (NASDAQ:NAVI) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately NAVI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NAVI were disappointed as the stock returned -5.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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