Hedge Funds Are Dumping NVE Corporation (NVEC)

In this article we will take a look at whether hedge funds think NVE Corporation (NASDAQ:NVEC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is NVE Corporation (NASDAQ:NVEC) a buy right now? Investors who are in the know are becoming less confident. The number of long hedge fund positions were trimmed by 1 recently. Our calculations also showed that NVEC 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).

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

If you’d ask most market participants, hedge funds are seen as underperforming, old financial tools of the past. While there are more than 8000 funds in operation at the moment, Our researchers choose to focus on the moguls of this group, approximately 850 funds. These money managers oversee the majority of all hedge funds’ total capital, and by tailing their top picks, Insider Monkey has figured out many investment strategies that have historically outpaced the S&P 500 index. 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 .

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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 let’s analyze the key hedge fund action regarding NVE Corporation (NASDAQ:NVEC).

Hedge fund activity in NVE Corporation (NASDAQ:NVEC)

Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NVEC over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in NVE Corporation (NASDAQ:NVEC) was held by Renaissance Technologies, which reported holding $9.3 million worth of stock at the end of September. It was followed by AQR Capital Management with a $3.7 million position. Other investors bullish on the company included Millennium Management, GLG Partners, and D E Shaw. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to NVE Corporation (NASDAQ:NVEC), around 0.08% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to NVEC.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified NVEC as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to NVE Corporation (NASDAQ:NVEC). We will take a look at Lawson Products, Inc. (NASDAQ:LAWS), NexTier Oilfield Solutions Inc. (NYSE:NEX), GenMark Diagnostics, Inc (NASDAQ:GNMK), and Navigator Holdings Ltd (NYSE:NVGS). This group of stocks’ market valuations are similar to NVEC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LAWS 7 15303 0
NEX 21 85243 -8
GNMK 14 43800 -3
NVGS 13 18880 -3
Average 13.75 40807 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $18 million in NVEC’s case. NexTier Oilfield Solutions Inc. (NYSE:NEX) is the most popular stock in this table. On the other hand Lawson Products, Inc. (NASDAQ:LAWS) is the least popular one with only 7 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. 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 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on NVEC, though not to the same extent, as the stock returned 21.4% during the second quarter and outperformed the market.

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