At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not National Research Corporation (NASDAQ:NRC) makes for a good investment right now.
Is National Research Corporation (NASDAQ:NRC) a good stock to buy now? The best stock pickers were taking a pessimistic view. The number of long hedge fund bets shrunk by 1 recently. National Research Corporation (NASDAQ:NRC) was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 10. Our calculations also showed that NRC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Roger Ibbotson of Zebra Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to go over the recent hedge fund action surrounding National Research Corporation (NASDAQ:NRC).
Hedge fund activity in National Research Corporation (NASDAQ:NRC)
At third quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NRC over the last 21 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in National Research Corporation (NASDAQ:NRC) was held by Renaissance Technologies, which reported holding $26.5 million worth of stock at the end of September. It was followed by Royce & Associates with a $7.8 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Zebra Capital Management. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to National Research Corporation (NASDAQ:NRC), around 0.76% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to NRC.
Because National Research Corporation (NASDAQ:NRC) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few money managers who sold off their entire stakes heading into Q4. It’s worth mentioning that D. E. Shaw’s D E Shaw sold off the biggest position of all the hedgies tracked by Insider Monkey, comprising an estimated $0.3 million in stock, and Robert Joseph Caruso’s Select Equity Group was right behind this move, as the fund cut about $0.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to National Research Corporation (NASDAQ:NRC). We will take a look at LexinFintech Holdings Ltd. (NASDAQ:LX), Fluor Corporation (NYSE:FLR), Compass Diversified Holdings (NYSE:CODI), PDC Energy Inc (NASDAQ:PDCE), First Midwest Bancorp Inc (NASDAQ:FMBI), HeadHunter Group PLC (NASDAQ:HHR), and Delek Logistics Partners LP (NYSE:DKL). This group of stocks’ market caps are closest to NRC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LX | 10 | 11980 | -4 |
| FLR | 17 | 84394 | -3 |
| CODI | 3 | 15974 | -1 |
| PDCE | 24 | 211888 | 1 |
| FMBI | 17 | 43845 | 6 |
| HHR | 8 | 18061 | 3 |
| DKL | 1 | 2964 | 0 |
| Average | 11.4 | 55587 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.4 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $38 million in NRC’s case. PDC Energy Inc (NASDAQ:PDCE) is the most popular stock in this table. On the other hand Delek Logistics Partners LP (NYSE:DKL) is the least popular one with only 1 bullish hedge fund positions. National Research Corporation (NASDAQ:NRC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NRC is 32.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately NRC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NRC investors were disappointed as the stock returned 8.5% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
