Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Norfolk Southern Corp. (NYSE:NSC) a marvelous investment now? Prominent investors are taking an optimistic view. The number of long hedge fund positions advanced by 2 recently. 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 Perrigo Company (NASDAQ:PRGO), General Growth Properties Inc (NYSE:GGP), and Franklin Resources, Inc. (NYSE:BEN) to gather more data points.
Follow Norfolk Southern Corp (NYSE:NSC)
Follow Norfolk Southern Corp (NYSE:NSC)
If you’d ask most market participants, hedge funds are assumed to be underperforming, outdated investment tools of yesteryear. While there are greater than 8000 funds trading today, We choose to focus on the crème de la crème of this club, around 700 funds. These money managers have their hands on the lion’s share of the hedge fund industry’s total asset base, and by tailing their best picks, Insider Monkey has brought to light numerous investment strategies that have historically outperformed the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Now, we’re going to take a look at the fresh action surrounding Norfolk Southern Corp. (NYSE:NSC).
How are hedge funds trading Norfolk Southern Corp. (NYSE:NSC)?
Heading into Q4, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Luminus Management, managed by Jonathan Barrett and Paul Segal, holds the biggest position in Norfolk Southern Corp. (NYSE:NSC). Luminus Management has a $56.3 million position in the stock, comprising 1.7% of its 13F portfolio. Coming in second is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $54.1 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers that hold long positions include David Harding’s Winton Capital Management, D. E. Shaw’s D E Shaw and Phill Gross and Robert Atchinson’s Adage Capital Management.
As one would reasonably expect, some big names have jumped into Norfolk Southern Corp. (NYSE:NSC) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in Norfolk Southern Corp. (NYSE:NSC). Arrowstreet Capital had $18.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $14.9 million position during the quarter. The other funds with new positions in the stock are Alexander Roepers’s Atlantic Investment Management, Ken Brodkowitz and Mike Vermut’s Newland Capital, and Peter Muller’s PDT Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Norfolk Southern Corp. (NYSE:NSC) but similarly valued. We will take a look at Perrigo Company (NASDAQ:PRGO), General Growth Properties Inc (NYSE:GGP), Franklin Resources, Inc. (NYSE:BEN), and Baker Hughes Incorporated (NYSE:BHI). All of these stocks’ market caps match NSC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 45 hedge funds with bullish positions and the average amount invested in these stocks was $2.42 billion. That figure was $495 million in NSC’s case. Perrigo Company (NASDAQ:PRGO) is the most popular stock in this table. On the other hand General Growth Properties Inc (NYSE:GGP) is the least popular one with only 27 bullish hedge fund positions. Norfolk Southern Corp. (NYSE:NSC) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on.