The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought NewMarket Corporation (NYSE:NEU) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is NewMarket Corporation (NYSE:NEU) worth your attention right now? Hedge funds were taking a bullish view. The number of long hedge fund bets went up by 1 lately. NewMarket Corporation (NYSE:NEU) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistics is 29. Our calculations also showed that NEU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 20 hedge funds in our database with NEU holdings at the end of March.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a gander at the fresh hedge fund action regarding NewMarket Corporation (NYSE:NEU).
How are hedge funds trading NewMarket Corporation (NYSE:NEU)?
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NEU over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in NewMarket Corporation (NYSE:NEU) was held by AQR Capital Management, which reported holding $47.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $42 million position. Other investors bullish on the company included Citadel Investment Group, Winton Capital Management, and GAMCO Investors. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to NewMarket Corporation (NYSE:NEU), around 0.34% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.2 percent of its 13F equity portfolio to NEU.
As industrywide interest jumped, key money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in NewMarket Corporation (NYSE:NEU). Marshall Wace LLP had $2.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Paul Tudor Jones’s Tudor Investment Corp, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now review hedge fund activity in other stocks similar to NewMarket Corporation (NYSE:NEU). These stocks are Silicon Laboratories Inc. (NASDAQ:SLAB), Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI), Mercury Systems Inc (NASDAQ:MRCY), Schneider National, Inc. (NYSE:SNDR), FirstService Corporation (NASDAQ:FSV), Choice Hotels International, Inc. (NYSE:CHH), and Stag Industrial Inc (NYSE:STAG). This group of stocks’ market values are similar to NEU’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.3 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $139 million in NEU’s case. Silicon Laboratories Inc.(NASDAQ:SLAB) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. NewMarket Corporation (NYSE:NEU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEU is 63.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately NEU wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NEU were disappointed as the stock returned -14.1% in Q3 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.