Hedge Funds Were Buying Norwegian Cruise Line Holdings Ltd (NCLH) Before The Coronavirus

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH).

Is Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) worth your attention right now? Hedge funds are becoming hopeful. The number of bullish hedge fund positions went up by 4 lately. Our calculations also showed that NCLH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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.

Today there are several tools investors have at their disposal to size up stocks. A pair of the most innovative tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best money managers can trounce the S&P 500 by a significant margin (see the details here).


Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the latest hedge fund action surrounding Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH).

Hedge fund activity in Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH)

At the end of the fourth quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. On the other hand, there were a total of 40 hedge funds with a bullish position in NCLH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NCLH A Good Stock To Buy?

Among these funds, AQR Capital Management held the most valuable stake in Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), which was worth $297.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $297.4 million worth of shares. Marshall Wace LLP, GMT Capital, and MIG Capital 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 MIG Capital allocated the biggest weight to Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), around 5.74% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, designating 4.88 percent of its 13F equity portfolio to NCLH.

As industrywide interest jumped, some big names were leading the bulls’ herd. Kettle Hill Capital Management, managed by Andrew Kurita, established the largest position in Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH). Kettle Hill Capital Management had $7.7 million invested in the company at the end of the quarter. Charles Davidson and Joseph Jacobs’s Wexford Capital also initiated a $5.3 million position during the quarter. The following funds were also among the new NCLH investors: Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, Guy Shahar’s DSAM Partners, and David Harding’s Winton Capital Management.

Let’s now review hedge fund activity in other stocks similar to Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH). We will take a look at Raymond James Financial, Inc. (NYSE:RJF), Slack Technologies Inc (NYSE:WORK), Ubiquiti Inc. (NYSE:UI), and China Eastern Airlines Corp. Ltd. (NYSE:CEA). This group of stocks’ market caps are similar to NCLH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RJF 28 750978 -1
WORK 29 294837 0
UI 25 301453 6
CEA 1 578 0
Average 20.75 336962 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $337 million. That figure was $1090 million in NCLH’s case. Slack Technologies Inc (NYSE:WORK) is the most popular stock in this table. On the other hand China Eastern Airlines Corp. Ltd. (NYSE:CEA) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately NCLH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NCLH were disappointed as the stock returned -81.3% during the first two and a half months of 2020 (through March 16th) 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 most of these stocks already outperformed the market in Q1.

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