In this article we will check out the progression of hedge fund sentiment towards Northern Trust Corporation (NASDAQ:NTRS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Northern Trust Corporation (NASDAQ:NTRS) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. NTRS was in 27 hedge funds’ portfolios at the end of March. There were 35 hedge funds in our database with NTRS holdings at the end of the previous quarter. Our calculations also showed that NTRS 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.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the recent hedge fund action encompassing Northern Trust Corporation (NASDAQ:NTRS).
Hedge fund activity in Northern Trust Corporation (NASDAQ:NTRS)
Heading into the second quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from one quarter earlier. By comparison, 34 hedge funds held shares or bullish call options in NTRS a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Northern Trust Corporation (NASDAQ:NTRS) was held by Ariel Investments, which reported holding $145.8 million worth of stock at the end of September. It was followed by Kingstown Capital Management with a $37.7 million position. Other investors bullish on the company included GAMCO Investors, AQR Capital Management, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Kingstown Capital Management allocated the biggest weight to Northern Trust Corporation (NASDAQ:NTRS), around 5.8% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, designating 3.17 percent of its 13F equity portfolio to NTRS.
Because Northern Trust Corporation (NASDAQ:NTRS) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few money managers that decided to sell off their entire stakes heading into Q4. At the top of the heap, Ravi Chopra’s Azora Capital cut the largest position of the 750 funds tracked by Insider Monkey, comprising about $12.4 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also cut its stock, about $4.9 million worth. These moves are interesting, as total hedge fund interest was cut by 8 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Northern Trust Corporation (NASDAQ:NTRS). We will take a look at Church & Dwight Co., Inc. (NYSE:CHD), Smith & Nephew plc (NYSE:SNN), Tiffany & Co. (NYSE:TIF), and Keysight Technologies Inc (NYSE:KEYS). This group of stocks’ market caps are similar to NTRS’s market cap.
|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 38.5 hedge funds with bullish positions and the average amount invested in these stocks was $1126 million. That figure was $330 million in NTRS’s case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 9 bullish hedge fund positions. Northern Trust Corporation (NASDAQ:NTRS) 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately NTRS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NTRS investors were disappointed as the stock returned 4.7% 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.
Disclosure: None. This article was originally published at Insider Monkey.