Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is National Vision Holdings, Inc. (NASDAQ:EYE) a buy, sell, or hold? Hedge funds are getting more optimistic. The number of long hedge fund positions moved up by 1 lately. Our calculations also showed that eye isn’t among the 30 most popular stocks among hedge funds. EYE was in 16 hedge funds’ portfolios at the end of the first quarter of 2019. There were 15 hedge funds in our database with EYE positions at the end of the previous quarter.
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 market by 40 percentage points since May 2014 through May 30, 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.
We’re going to view the fresh hedge fund action regarding National Vision Holdings, Inc. (NASDAQ:EYE).
Hedge fund activity in National Vision Holdings, Inc. (NASDAQ:EYE)
Heading into the second quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EYE over the last 15 quarters. So, let’s examine 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 National Vision Holdings, Inc. (NASDAQ:EYE), which was worth $197.7 million at the end of the first quarter. On the second spot was Select Equity Group which amassed $119.2 million worth of shares. Moreover, Element Capital Management, Citadel Investment Group, and D E Shaw were also bullish on National Vision Holdings, Inc. (NASDAQ:EYE), allocating a large percentage of their portfolios to this stock.
Now, key money managers have been driving this bullishness. Ellington, managed by Mike Vranos, established the most valuable position in National Vision Holdings, Inc. (NASDAQ:EYE). Ellington had $2.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.5 million position during the quarter. The following funds were also among the new EYE investors: Bruce Kovner’s Caxton Associates LP, Matthew Hulsizer’s PEAK6 Capital Management, and Brandon Haley’s Holocene Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as National Vision Holdings, Inc. (NASDAQ:EYE) but similarly valued. We will take a look at RPC, Inc. (NYSE:RES), Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA), Integer Holdings Corporation (NYSE:ITGR), and Triton International Limited (NYSE:TRTN). This group of stocks’ market values are similar to EYE’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 24 hedge funds with bullish positions and the average amount invested in these stocks was $208 million. That figure was $395 million in EYE’s case. Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA) is the most popular stock in this table. On the other hand Triton International Limited (NYSE:TRTN) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks National Vision Holdings, Inc. (NASDAQ:EYE) is even less popular than TRTN. Hedge funds dodged a bullet by taking a bearish stance towards EYE. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately EYE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); EYE investors were disappointed as the stock returned -1.5% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.