Is NAV A Good Stock To Buy Now?

In this article we will analyze whether Navistar International Corp (NYSE:NAV) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is NAV a good stock to buy now? Navistar International Corp (NYSE:NAV) investors should pay attention to an increase in hedge fund interest lately. Navistar International Corp (NYSE:NAV) was in 43 hedge funds’ portfolios at the end of September. The all time high for this statistic is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 33 hedge funds in our database with NAV holdings at the end of June. Our calculations also showed that NAV 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.

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 66 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.

Keith Meister of Corvex Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind let’s review the new hedge fund action regarding Navistar International Corp (NYSE:NAV).

Do Hedge Funds Think NAV Is A Good Stock To Buy Now?

At the end of September, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in NAV over the last 21 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Icahn Capital LP, managed by Carl Icahn, holds the largest position in Navistar International Corp (NYSE:NAV). Icahn Capital LP has a $728.4 million position in the stock, comprising 4.2% of its 13F portfolio. The second most bullish fund manager is MHR Fund Management, managed by Mark Rachesky, which holds a $706.4 million position; the fund has 56.3% of its 13F portfolio invested in the stock. Other peers that are bullish contain Mario Gabelli’s GAMCO Investors, Renaissance Technologies and Carl Tiedemann and Michael Tiedemann’s TIG Advisors. In terms of the portfolio weights assigned to each position MHR Fund Management allocated the biggest weight to Navistar International Corp (NYSE:NAV), around 56.33% of its 13F portfolio. Twin Capital Management is also relatively very bullish on the stock, earmarking 6.57 percent of its 13F equity portfolio to NAV.

As one would reasonably expect, specific money managers have jumped into Navistar International Corp (NYSE:NAV) headfirst. GAMCO Investors, managed by Mario Gabelli, assembled the biggest position in Navistar International Corp (NYSE:NAV). GAMCO Investors had $151.9 million invested in the company at the end of the quarter. Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors also initiated a $31.8 million position during the quarter. The other funds with new positions in the stock are Michael A. Price and Amos Meron’s Empyrean Capital Partners, John Bader’s Halcyon Asset Management, and Keith Meister’s Corvex Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Navistar International Corp (NYSE:NAV) but similarly valued. These stocks are Littelfuse, Inc. (NASDAQ:LFUS), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), Starwood Property Trust, Inc. (NYSE:STWD), Ashland Global Holdings Inc.. (NYSE:ASH), China Biologic Products Holdings Inc (NASDAQ:CBPO), Silicon Laboratories Inc. (NASDAQ:SLAB), and Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI). This group of stocks’ market values are similar to NAV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LFUS 22 352091 -2
ARNA 43 989966 2
STWD 17 93721 -5
ASH 46 1104849 14
CBPO 18 848680 -5
SLAB 26 99748 -2
SHI 3 10098 0
Average 25 499879 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $500 million. That figure was $2103 million in NAV’s case. Ashland Global Holdings Inc.. (NYSE:ASH) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. Navistar International Corp (NYSE:NAV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NAV is 86.5. 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 positive signal but 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 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately NAV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NAV were disappointed as the stock returned 1.6% since the end of September (through 12/8) 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 many of these stocks already outperformed the market so far this year.

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