Is National CineMedia, Inc. (NCMI) A Good Stock To Buy?

Before we spend countless hours researching a company, we’d like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of National CineMedia, Inc. (NASDAQ:NCMI).

National CineMedia, Inc. (NASDAQ:NCMI) was in 19 hedge funds’ portfolios at the end of December. NCMI investors should pay attention to an increase in hedge fund sentiment of late. There were 15 hedge funds in our database with NCMI holdings at the end of the previous quarter. Our calculations also showed that ncmi 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.

BlueMountain Capital Management's Returns, AUM and Holdings

Let’s view the latest hedge fund action encompassing National CineMedia, Inc. (NASDAQ:NCMI).

What have hedge funds been doing with National CineMedia, Inc. (NASDAQ:NCMI)?

At Q4’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NCMI over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with NCMI Positions

More specifically, Greenhouse Funds was the largest shareholder of National CineMedia, Inc. (NASDAQ:NCMI), with a stake worth $15.1 million reported as of the end of December. Trailing Greenhouse Funds was Renaissance Technologies, which amassed a stake valued at $5.7 million. Citadel Investment Group, Two Sigma Advisors, and Blue Mountain Capital were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, some big names have been driving this bullishness. AQR Capital Management, managed by Cliff Asness, assembled the biggest position in National CineMedia, Inc. (NASDAQ:NCMI). AQR Capital Management had $0.3 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $0.2 million position during the quarter. The other funds with brand new NCMI positions are Minhua Zhang’s Weld Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Andrew Weiss’s Weiss Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as National CineMedia, Inc. (NASDAQ:NCMI) but similarly valued. We will take a look at ADTRAN, Inc. (NASDAQ:ADTN), Precision Drilling Corp (NYSE:PDS), Veracyte Inc (NASDAQ:VCYT), and Hoegh LNG Partners LP (NYSE:HMLP). This group of stocks’ market valuations are closest to NCMI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADTN 15 37702 7
PDS 14 29983 -1
VCYT 17 73290 3
HMLP 7 21022 2
Average 13.25 40499 2.75

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 $40 million. That figure was $30 million in NCMI’s case. Veracyte Inc (NASDAQ:VCYT) is the most popular stock in this table. On the other hand Hoegh LNG Partners LP (NYSE:HMLP) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks National CineMedia, Inc. (NASDAQ:NCMI) is more popular among hedge funds. 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 NCMI wasn’t nearly as popular as these 15 stock and hedge funds that were betting on NCMI were disappointed as the stock returned 15.1% 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.