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Hedge Funds Souring On National Bank Holdings Corp (NBHC)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards National Bank Holdings Corp (NYSE:NBHC).

Is National Bank Holdings Corp (NYSE:NBHC) a buy, sell, or hold? Money managers are becoming less hopeful. The number of long hedge fund bets decreased by 1 in recent months. Our calculations also showed that NBHC 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Fred Cummings of Elizabeth Park Capital

Fred Cummings of Elizabeth Park Capital

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 let’s take a look at the key hedge fund action regarding National Bank Holdings Corp (NYSE:NBHC).

How are hedge funds trading National Bank Holdings Corp (NYSE:NBHC)?

At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in NBHC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in National Bank Holdings Corp (NYSE:NBHC), worth close to $36.4 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Fred Cummings of Elizabeth Park Capital Management, with a $5.9 million position; the fund has 4.4% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to National Bank Holdings Corp (NYSE:NBHC), around 4.44% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, earmarking 0.16 percent of its 13F equity portfolio to NBHC.

Judging by the fact that National Bank Holdings Corp (NYSE:NBHC) has faced a decline in interest from the smart money, it’s easy to see that there exists a select few funds that slashed their full holdings in the first quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, worth an estimated $1.1 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $0.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to National Bank Holdings Corp (NYSE:NBHC). These stocks are I-Mab (NASDAQ:IMAB), Enterprise Financial Services Corp (NASDAQ:EFSC), Model N Inc (NYSE:MODN), and Sangamo Therapeutics, Inc. (NASDAQ:SGMO). This group of stocks’ market caps are similar to NBHC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IMAB 4 19613 4
EFSC 8 25205 -6
MODN 16 101191 -3
SGMO 21 94314 3
Average 12.25 60081 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $48 million in NBHC’s case. Sangamo Therapeutics, Inc. (NASDAQ:SGMO) is the most popular stock in this table. On the other hand I-Mab (NASDAQ:IMAB) is the least popular one with only 4 bullish hedge fund positions. National Bank Holdings Corp (NYSE:NBHC) 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 NBHC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NBHC investors were disappointed as the stock returned 11.8% 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.