Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Navient Corp (NASDAQ:NAVI) to find out whether there were any major changes in hedge funds’ views.
Is NAVI a good stock to buy now? Navient Corp (NASDAQ:NAVI) was in 22 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 38. NAVI investors should be aware of a decrease in hedge fund sentiment of late. There were 27 hedge funds in our database with NAVI positions at the end of the second quarter. Our calculations also showed that NAVI 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.
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. With all of this in mind we’re going to take a glance at the recent hedge fund action encompassing Navient Corp (NASDAQ:NAVI).
Do Hedge Funds Think NAVI Is A Good Stock To Buy Now?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NAVI over the last 21 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in Navient Corp (NASDAQ:NAVI), worth close to $33.8 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is Omega Advisors, managed by Leon Cooperman, which holds a $26.9 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise D. E. Shaw’s D E Shaw, George McCabe’s Portolan Capital Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Omega Advisors allocated the biggest weight to Navient Corp (NASDAQ:NAVI), around 2.64% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, earmarking 2.16 percent of its 13F equity portfolio to NAVI.
Due to the fact that Navient Corp (NASDAQ:NAVI) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that elected to cut their positions entirely heading into Q4. At the top of the heap, Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors sold off the largest investment of all the hedgies watched by Insider Monkey, valued at about $56.2 million in stock. Brandon Haley’s fund, Holocene Advisors, also sold off its stock, about $9 million worth. These transactions are important to note, as total hedge fund interest dropped by 5 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Navient Corp (NASDAQ:NAVI). These stocks are Uniqure NV (NASDAQ:QURE), Amarin Corporation plc (NASDAQ:AMRN), Adient plc (NYSE:ADNT), Celsius Holdings, Inc. (NASDAQ:CELH), Hancock Whitney Corporation (NASDAQ:HWC), Steven Madden, Ltd. (NASDAQ:SHOO), and 8×8, Inc. (NYSE:EGHT). All of these stocks’ market caps are closest to NAVI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $257 million. That figure was $168 million in NAVI’s case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand Celsius Holdings, Inc. (NASDAQ:CELH) is the least popular one with only 17 bullish hedge fund positions. Navient Corp (NASDAQ:NAVI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NAVI is 28.7. 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. 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 December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on NAVI as the stock returned 11.2% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.