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Hedge Funds Are Crazy About NVE Corporation (NVEC)

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in October, blaming macroeconomic conditions and unpredictable events that hit several sectors, with healthcare among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about NVE Corporation (NASDAQ:NVEC) in this article.

NVE Corporation (NASDAQ:NVEC) has experienced an increase in enthusiasm from smart money of late. Our calculations also showed that NVEC isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

D. E. Shaw

Let’s take a glance at the new hedge fund action encompassing NVE Corporation (NASDAQ:NVEC).

Hedge fund activity in NVE Corporation (NASDAQ:NVEC)

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the second quarter of 2018. On the other hand, there were a total of 2 hedge funds with a bullish position in NVEC at the beginning of this year. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

No of Hedge Funds NVEC Positions

When looking at the institutional investors followed by Insider Monkey, Jim Simons’s Renaissance Technologies has the number one position in NVE Corporation (NASDAQ:NVEC), worth close to $11.5 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is GLG Partners, led by Noam Gottesman, holding a $2.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish encompass D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management.

Consequently, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, created the most outsized position in NVE Corporation (NASDAQ:NVEC). Millennium Management had $0.2 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks similar to NVE Corporation (NASDAQ:NVEC). These stocks are OptiNose, Inc. (NASDAQ:OPTN), The First Bancshares, Inc. (MS) (NASDAQ:FBMS), Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), and Pennantpark Floating Rate Capital Ltd (NASDAQ:PFLT). This group of stocks’ market caps match NVEC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OPTN 6 15873 0
FBMS 7 40520 0
ACHN 23 84660 5
PFLT 5 12888 -2
Average 10.25 38485 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $15 million in NVEC’s case. Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) is the most popular stock in this table. On the other hand Pennantpark Floating Rate Capital Ltd (NASDAQ:PFLT) is the least popular one with only 5 bullish hedge fund positions. NVE Corporation (NASDAQ:NVEC) 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. In this regard ACHN might be a better candidate to consider a long position.

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

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