Is National Western Life Group, Inc. (NWLI) A Good Stock To Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

National Western Life Group, Inc. (NASDAQ:NWLI) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. Our calculations also showed that NWLI isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the fresh hedge fund action regarding National Western Life Group, Inc. (NASDAQ:NWLI).

Hedge fund activity in National Western Life Group, Inc. (NASDAQ:NWLI)

At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NWLI over the last 16 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with NWLI Positions

Among these funds, Renaissance Technologies held the most valuable stake in National Western Life Group, Inc. (NASDAQ:NWLI), which was worth $5.7 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $5.6 million worth of shares. Moreover, Royce & Associates, Citadel Investment Group, and Arrowstreet Capital were also bullish on National Western Life Group, Inc. (NASDAQ:NWLI), allocating a large percentage of their portfolios to this stock.

Because National Western Life Group, Inc. (NASDAQ:NWLI) has experienced a decline in interest from the smart money, we can see that there were a few fund managers that decided to sell off their full holdings last quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest stake of all the hedgies watched by Insider Monkey, worth close to $0.4 million in stock. Peter Muller’s fund, PDT Partners, also dumped its stock, about $0.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to National Western Life Group, Inc. (NASDAQ:NWLI). We will take a look at Luminex Corporation (NASDAQ:LMNX), Atara Biotherapeutics Inc (NASDAQ:ATRA), OneSpaWorld Holdings Limited (NASDAQ:OSW), and Standex International Corporation (NYSE:SXI). This group of stocks’ market values resemble NWLI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LMNX 17 147610 -4
ATRA 12 377753 -3
OSW 11 86464 0
SXI 9 32228 -2
Average 12.25 161014 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $18 million in NWLI’s case. Luminex Corporation (NASDAQ:LMNX) is the most popular stock in this table. On the other hand Standex International Corporation (NYSE:SXI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks National Western Life Group, Inc. (NASDAQ:NWLI) is even less popular than SXI. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on NWLI, though not to the same extent, as the stock returned 4.4% during the third quarter and outperformed the market as well.

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