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Hedge Funds Are Selling National Research Corporation (NRC)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of National Research Corporation (NASDAQ:NRC) based on that data.

National Research Corporation (NASDAQ:NRC) was in 8 hedge funds’ portfolios at the end of March. NRC shareholders have witnessed a decrease in hedge fund interest in recent months. There were 9 hedge funds in our database with NRC positions at the end of the previous quarter. Our calculations also showed that NRC 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.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chuck Royce

Chuck Royce of Royce & Associates

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. Now we’re going to view the new hedge fund action regarding National Research Corporation (NASDAQ:NRC).

What have hedge funds been doing with National Research Corporation (NASDAQ:NRC)?

At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in NRC a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the largest position in National Research Corporation (NASDAQ:NRC). Renaissance Technologies has a $27.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with a $7.9 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that are bullish include Cliff Asness’s AQR Capital Management, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to National Research Corporation (NASDAQ:NRC), around 0.37% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.11 percent of its 13F equity portfolio to NRC.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Point72 Asset Management. 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 NRC as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as National Research Corporation (NASDAQ:NRC) but similarly valued. We will take a look at Uniti Group Inc. (NASDAQ:UNIT), Osisko Gold Royalties Ltd (NYSE:OR), Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), and AdaptHealth Corp. (NASDAQ:AHCO). This group of stocks’ market valuations resemble NRC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNIT 13 73283 -2
OR 13 101894 0
TRHC 7 18000 1
AHCO 10 349980 0
Average 10.75 135789 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $41 million in NRC’s case. Uniti Group Inc. (NASDAQ:UNIT) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 7 bullish hedge fund positions. National Research Corporation (NASDAQ:NRC) 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. 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 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately NRC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NRC investors were disappointed as the stock returned 19.8% 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.