“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. 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 National General Holdings Corp (NASDAQ:NGHC) and see how it was affected.
National General Holdings Corp (NASDAQ:NGHC) was in 11 hedge funds’ portfolios at the end of September. NGHC has seen an increase in hedge fund interest lately. There were 9 hedge funds in our database with NGHC holdings at the end of the previous quarter. Our calculations also showed that nghc isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the recent hedge fund action surrounding National General Holdings Corp (NASDAQ:NGHC).
What does the smart money think about National General Holdings Corp (NASDAQ:NGHC)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NGHC over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Park West Asset Management was the largest shareholder of National General Holdings Corp (NASDAQ:NGHC), with a stake worth $124 million reported as of the end of September. Trailing Park West Asset Management was MSDC Management, which amassed a stake valued at $58 million. Strycker View Capital, Millennium Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. BlueCrest Capital Mgmt., managed by Michael Platt and William Reeves, assembled the most valuable position in National General Holdings Corp (NASDAQ:NGHC). BlueCrest Capital Mgmt. had $0.3 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $0.1 million position during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as National General Holdings Corp (NASDAQ:NGHC) but similarly valued. These stocks are Stag Industrial Inc (NYSE:STAG), The Bank of N.T. Butterfield & Son Limited (NYSE:NTB), Denbury Resources Inc. (NYSE:DNR), and Columbia Banking System Inc (NASDAQ:COLB). This group of stocks’ market caps are closest to NGHC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STAG | 11 | 70370 | 2 |
| NTB | 16 | 242622 | -1 |
| DNR | 21 | 286316 | 3 |
| COLB | 11 | 132802 | 2 |
| Average | 14.75 | 183028 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $201 million in NGHC’s case. Denbury Resources Inc. (NYSE:DNR) is the most popular stock in this table. On the other hand Stag Industrial Inc (NYSE:STAG) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks National General Holdings Corp (NASDAQ:NGHC) is even less popular than STAG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
