With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was NMI Holdings Inc (NASDAQ:NMIH).
Is NMI Holdings Inc (NASDAQ:NMIH) a buy here? Investors who are in the know were selling. The number of bullish hedge fund bets shrunk by 4 recently. NMI Holdings Inc (NASDAQ:NMIH) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistic is 30. Our calculations also showed that NMIH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Howard Marks of Oaktree Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to view the new hedge fund action regarding NMI Holdings Inc (NASDAQ:NMIH).
Do Hedge Funds Think NMIH Is A Good Stock To Buy Now?
At second quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in NMIH a year ago. 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, Oaktree Capital Management was the largest shareholder of NMI Holdings Inc (NASDAQ:NMIH), with a stake worth $109.4 million reported as of the end of June. Trailing Oaktree Capital Management was Berylson Capital Partners, which amassed a stake valued at $22.1 million. Royce & Associates, Millennium Management, and Senator Investment Group 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 Berylson Capital Partners allocated the biggest weight to NMI Holdings Inc (NASDAQ:NMIH), around 4.9% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, designating 1.48 percent of its 13F equity portfolio to NMIH.
Judging by the fact that NMI Holdings Inc (NASDAQ:NMIH) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that slashed their entire stakes heading into Q3. At the top of the heap, Richard Driehaus’s Driehaus Capital said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $11.7 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt., also said goodbye to its stock, about $9.6 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NMI Holdings Inc (NASDAQ:NMIH) but similarly valued. These stocks are Janus International Group Inc (NYSE:JBI), GCM Grosvenor Inc. (NASDAQ:GCMG), Park National Corporation (NYSE:PRK), HNI Corp (NYSE:HNI), ADC Therapeutics SA (NYSE:ADCT), Tellurian Inc. (NASDAQ:TELL), and Granite Construction Incorporated (NYSE:GVA). This group of stocks’ market valuations are closest to NMIH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JBI | 23 | 362844 | -4 |
| GCMG | 24 | 212751 | 7 |
| PRK | 6 | 3844 | 1 |
| HNI | 15 | 47240 | 3 |
| ADCT | 8 | 239702 | 0 |
| TELL | 17 | 103275 | 5 |
| GVA | 14 | 32797 | 1 |
| Average | 15.3 | 143208 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $201 million in NMIH’s case. GCM Grosvenor Inc. (NASDAQ:GCMG) is the most popular stock in this table. On the other hand Park National Corporation (NYSE:PRK) is the least popular one with only 6 bullish hedge fund positions. NMI Holdings Inc (NASDAQ:NMIH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NMIH is 63.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on NMIH as the stock returned 9.6% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
