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Is Natural Grocers by Vitamin Cottage Inc (NGVC) A Good Stock To Buy?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) based on that data.

Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) has experienced a decrease in hedge fund interest in recent months. Our calculations also showed that NGVC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the key hedge fund action encompassing Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC).

What does smart money think about Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC)?

At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in NGVC a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is NGVC A Good Stock To Buy?

More specifically, GMT Capital was the largest shareholder of Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC), with a stake worth $6.6 million reported as of the end of September. Trailing GMT Capital was Renaissance Technologies, which amassed a stake valued at $4.8 million. D E Shaw, Royce & Associates, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC), around 0.37% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to NGVC.

Because Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedge funds that slashed their full holdings in the first quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $0.8 million in stock. Peter Algert and Kevin Coldiron’s fund, Algert Coldiron Investors, also dumped its stock, about $0.2 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) but similarly valued. We will take a look at ORBCOMM Inc (NASDAQ:ORBC), Trilogy Metals Inc. (NYSE:TMQ), LAIX Inc. (NYSE:LAIX), and MiX Telematics Limited (NYSE:MIXT). This group of stocks’ market caps resemble NGVC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORBC 18 43349 1
TMQ 7 45140 -5
LAIX 1 45 -2
MIXT 9 17815 -3
Average 8.75 26587 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $15 million in NGVC’s case. ORBCOMM Inc (NASDAQ:ORBC) is the most popular stock in this table. On the other hand LAIX Inc. (NYSE:LAIX) is the least popular one with only 1 bullish hedge fund positions. Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on NGVC as the stock returned 45.9% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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