In this article we are going to use hedge fund sentiment as a tool and determine whether Nucor Corporation (NYSE:NUE) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Nucor Corporation (NYSE:NUE) has seen a decrease in activity from the world’s largest hedge funds recently. Nucor Corporation (NYSE:NUE) was in 25 hedge funds’ portfolios at the end of March. The all time high for this statistic is 33. There were 29 hedge funds in our database with NUE holdings at the end of December. Our calculations also showed that NUE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s review the fresh hedge fund action encompassing Nucor Corporation (NYSE:NUE).
Do Hedge Funds Think NUE Is A Good Stock To Buy Now?
At first quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NUE over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Nucor Corporation (NYSE:NUE), which was worth $54.3 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $49.3 million worth of shares. PEAK6 Capital Management, Adage Capital Management, and Masters Capital Management 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 Arjuna Capital allocated the biggest weight to Nucor Corporation (NYSE:NUE), around 1.61% of its 13F portfolio. Infini Capital is also relatively very bullish on the stock, designating 1.45 percent of its 13F equity portfolio to NUE.
Because Nucor Corporation (NYSE:NUE) has faced falling interest from hedge fund managers, we can see that there was a specific group of fund managers that decided to sell off their entire stakes by the end of the first quarter. At the top of the heap, Michael Gelband’s ExodusPoint Capital dropped the largest position of all the hedgies watched by Insider Monkey, worth about $6.6 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also cut its stock, about $5.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 4 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks similar to Nucor Corporation (NYSE:NUE). We will take a look at Franco-Nevada Corporation (NYSE:FNV), Fortive Corporation (NYSE:FTV), The Hartford Financial Services Group Inc (NYSE:HIG), Itau Unibanco Holding SA (NYSE:ITUB), Trip.com Group Limited (NASDAQ:TCOM), United Rentals, Inc. (NYSE:URI), and Canon Inc. (NYSE:CAJ). All of these stocks’ market caps are similar to NUE’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 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $1128 million. That figure was $192 million in NUE’s case. The Hartford Financial Services Group Inc (NYSE:HIG) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 9 bullish hedge fund positions. Nucor Corporation (NYSE:NUE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NUE is 40.4. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on NUE as the stock returned 21.6% since the end of the first quarter (through 7/9) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.