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

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards National Western Life Group, Inc. (NASDAQ:NWLI).

National Western Life Group, Inc. (NASDAQ:NWLI) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare NWLI to other stocks including Tobira Therapeutics Inc (NASDAQ:TBRA), Workiva Inc (NYSE:WK), and Rapid7 Inc (NASDAQ:RPD) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

With all of this in mind, we’re going to view the key action surrounding National Western Life Group, Inc. (NASDAQ:NWLI).

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

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NWLI over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adam Wright and Gary Kohler’s Blue Clay Capital has the biggest position in National Western Life Group, Inc. (NASDAQ:NWLI), worth close to $6.9 million, comprising 9.2% of its total 13F portfolio. Coming in second is Renaissance Technologies, one of the largest hedge funds in the world, which holds a $2.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Roger Ibbotson’s Zebra Capital Management, Chuck Royce’s Royce & Associates and Cliff Asness’s AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as National Western Life Group, Inc. (NASDAQ:NWLI) but similarly valued. We will take a look at Tobira Therapeutics Inc (NASDAQ:TBRA), Workiva Inc (NYSE:WK), Rapid7 Inc (NASDAQ:RPD), and Superior Industries International Inc. (NYSE:SUP). This group of stocks’ market valuations are similar to NWLI’s market valuation.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $13 million in NWLI’s case. Tobira Therapeutics Inc (NASDAQ:TBRA) is the most popular stock in this table. On the other hand Workiva Inc (NYSE:WK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks National Western Life Group, Inc. (NASDAQ:NWLI) is even less popular than WK. 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.

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