During the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 7 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of National Western Life Group, Inc. (NASDAQ:NWLI) and see how the stock is affected by the recent hedge fund activity.
Is National Western Life Group, Inc. (NASDAQ:NWLI) a healthy stock for your portfolio? Investors who are in the know are in an optimistic mood. The number of long hedge fund bets improved by 2 lately. Our calculations also showed that nwli isn’t among the 30 most popular stocks among hedge funds.
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 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.
We’re going to take a gander at the key hedge fund action regarding National Western Life Group, Inc. (NASDAQ:NWLI).
Hedge fund activity in National Western Life Group, Inc. (NASDAQ:NWLI)
At Q4’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NWLI over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of National Western Life Group, Inc. (NASDAQ:NWLI), with a stake worth $6.6 million reported as of the end of December. Trailing AQR Capital Management was Renaissance Technologies, which amassed a stake valued at $5.1 million. Royce & Associates, Arrowstreet Capital, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, specific money managers were leading the bulls’ herd. PDT Partners, managed by Peter Muller, assembled the most valuable position in National Western Life Group, Inc. (NASDAQ:NWLI). PDT Partners had $0.4 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $0.3 million position during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as National Western Life Group, Inc. (NASDAQ:NWLI) but similarly valued. These stocks are Amerisafe, Inc. (NASDAQ:AMSF), Bloom Energy Corporation (NYSE:BE), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), and Electronics For Imaging, Inc. (NASDAQ:EFII). This group of stocks’ market values match NWLI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMSF | 11 | 14091 | 0 |
| BE | 8 | 9690 | 0 |
| IOVA | 22 | 542031 | -5 |
| EFII | 12 | 137901 | -2 |
| Average | 13.25 | 175928 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $17 million in NWLI’s case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand Bloom Energy Corporation (NYSE:BE) is the least popular one with only 8 bullish hedge fund positions. National Western Life Group, Inc. (NASDAQ:NWLI) 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 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately NWLI wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); NWLI investors were disappointed as the stock returned -13.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
