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Hedge Funds Aren’t Done Buying NewMarket Corporation (NEU)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like NewMarket Corporation (NYSE:NEU).

Is NewMarket Corporation (NYSE:NEU) a safe investment today? The best stock pickers are buying. The number of bullish hedge fund positions increased by 7 lately. Our calculations also showed that NEU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Platt BlueCrest Capital

Michael Platt of BlueCrest Capital Mgmt.

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the new hedge fund action regarding NewMarket Corporation (NYSE:NEU).

Hedge fund activity in NewMarket Corporation (NYSE:NEU)

At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 35% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in NEU a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

NEU_dec2019

More specifically, Renaissance Technologies was the largest shareholder of NewMarket Corporation (NYSE:NEU), with a stake worth $49.1 million reported as of the end of September. Trailing Renaissance Technologies was Winton Capital Management, which amassed a stake valued at $42.7 million. AQR Capital Management, Millennium Management, and Citadel 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 Winton Capital Management allocated the biggest weight to NewMarket Corporation (NYSE:NEU), around 0.5% of its portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.22 percent of its 13F equity portfolio to NEU.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. PDT Partners, managed by Peter Muller, created the largest position in NewMarket Corporation (NYSE:NEU). PDT Partners had $3.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $1.4 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Michael Gelband’s ExodusPoint Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NewMarket Corporation (NYSE:NEU) but similarly valued. We will take a look at Moderna, Inc. (NASDAQ:MRNA), JBG SMITH Properties (NYSE:JBGS), Cree, Inc. (NASDAQ:CREE), and Dynatrace, Inc. (NYSE:DT). This group of stocks’ market caps match NEU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MRNA 8 204933 -10
JBGS 19 235290 2
CREE 22 357481 -2
DT 20 147275 20
Average 17.25 236245 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $194 million in NEU’s case. Cree, Inc. (NASDAQ:CREE) is the most popular stock in this table. On the other hand Moderna, Inc. (NASDAQ:MRNA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks NewMarket Corporation (NYSE:NEU) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NEU wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NEU were disappointed as the stock returned 4.6% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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