Nutrien Ltd. (NYSE:NTR) was in 32 hedge funds’ portfolios at the end of the fourth quarter of 2018. NTR investors should be aware of a decrease in hedge fund interest lately. There were 35 hedge funds in our database with NTR positions at the end of the previous quarter. Our calculations also showed that NTR isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s analyze the recent hedge fund action regarding Nutrien Ltd. (NYSE:NTR).
How are hedge funds trading Nutrien Ltd. (NYSE:NTR)?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in NTR 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.
Among these funds, Adage Capital Management held the most valuable stake in Nutrien Ltd. (NYSE:NTR), which was worth $184.5 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $175.7 million worth of shares. Moreover, Egerton Capital Limited, D E Shaw, and Millennium Management were also bullish on Nutrien Ltd. (NYSE:NTR), allocating a large percentage of their portfolios to this stock.
Due to the fact that Nutrien Ltd. (NYSE:NTR) has faced falling interest from hedge fund managers, we can see that there were a few hedge funds that slashed their entire stakes in the third quarter. At the top of the heap, Ken Grossman and Glen Schneider’s SG Capital Management dumped the biggest position of the 700 funds watched by Insider Monkey, totaling about $17.4 million in stock, and Nick Niell’s Arrowgrass Capital Partners was right behind this move, as the fund cut about $8.1 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 3 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Nutrien Ltd. (NYSE:NTR). These stocks are Yum! Brands, Inc. (NYSE:YUM), The Allstate Corporation (NYSE:ALL), Dollar General Corp. (NYSE:DG), and Equinix Inc (NASDAQ:EQIX). This group of stocks’ market values are similar to NTR’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 35 hedge funds with bullish positions and the average amount invested in these stocks was $1516 million. That figure was $934 million in NTR’s case. Equinix Inc (NASDAQ:EQIX) is the most popular stock in this table. On the other hand Dollar General Corp. (NYSE:DG) is the least popular one with only 30 bullish hedge fund positions. Nutrien Ltd. (NYSE:NTR) 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on NTR, though not to the same extent, as the stock returned 13.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.