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Here’s What Hedge Funds Think About Northwest Natural Holding Company (NWN)

“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Northwest Natural Holding Company (NYSE:NWN) and see how it was affected.

Northwest Natural Holding Company (NYSE:NWN) has experienced an increase in hedge fund sentiment lately. Our calculations also showed that NWN 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 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.

John Overdeck of Two Sigma

We’re going to view the latest hedge fund action regarding Northwest Natural Holding Company (NYSE:NWN).

What does smart money think about Northwest Natural Holding Company (NYSE:NWN)?

At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NWN over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with NWN Positions

More specifically, Renaissance Technologies was the largest shareholder of Northwest Natural Holding Company (NYSE:NWN), with a stake worth $44.7 million reported as of the end of March. Trailing Renaissance Technologies was Fisher Asset Management, which amassed a stake valued at $13.2 million. GLG Partners, Two Sigma Advisors, and GAMCO Investors were also very fond of the stock, giving the stock large weights in their portfolios.

As one would reasonably expect, key money managers were breaking ground themselves. GLG Partners, managed by Noam Gottesman, initiated the largest position in Northwest Natural Holding Company (NYSE:NWN). GLG Partners had $2.9 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also made a $0.5 million investment in the stock during the quarter. The other funds with brand new NWN positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..

Let’s now take a look at hedge fund activity in other stocks similar to Northwest Natural Holding Company (NYSE:NWN). These stocks are Dillard’s, Inc. (NYSE:DDS), International Speedway Corporation (NASDAQ:ISCA), Crocs, Inc. (NASDAQ:CROX), and Capitol Federal Financial, Inc. (NASDAQ:CFFN). This group of stocks’ market valuations are closest to NWN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DDS 28 154651 14
ISCA 19 167619 -1
CROX 25 393812 -1
CFFN 11 157223 2
Average 20.75 218326 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $69 million in NWN’s case. Dillard’s, Inc. (NYSE:DDS) is the most popular stock in this table. On the other hand Capitol Federal Financial, Inc. (NASDAQ:CFFN) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Northwest Natural Holding Company (NYSE:NWN) is even less popular than CFFN. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on NWN, though not to the same extent, as the stock returned 6.1% during the same time frame and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.

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