Is NCMI A Good Stock To Buy Now?

Is NCMI a good stock to buy now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

National CineMedia, Inc. (NASDAQ:NCMI) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 20. NCMI has seen a decrease in hedge fund sentiment recently. There were 18 hedge funds in our database with NCMI holdings at the end of June. Our calculations also showed that NCMI 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

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 let’s go over the recent hedge fund action surrounding National CineMedia, Inc. (NASDAQ:NCMI).

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

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the second quarter of 2020. By comparison, 18 hedge funds held shares or bullish call options in NCMI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NCMI A Good Stock To Buy?

More specifically, Greenhouse Funds was the largest shareholder of National CineMedia, Inc. (NASDAQ:NCMI), with a stake worth $10.6 million reported as of the end of September. Trailing Greenhouse Funds was Renaissance Technologies, which amassed a stake valued at $3.4 million. Hudson Bay Capital Management, Arrowstreet Capital, and Millennium Management 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 Greenhouse Funds allocated the biggest weight to National CineMedia, Inc. (NASDAQ:NCMI), around 1.61% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to NCMI.

Since National CineMedia, Inc. (NASDAQ:NCMI) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there were a few hedgies who were dropping their full holdings in the third quarter. At the top of the heap, Bruce Kovner’s Caxton Associates LP said goodbye to the biggest position of the 750 funds followed by Insider Monkey, worth close to $0.2 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $0.2 million worth. These transactions are important to note, as total hedge fund interest fell by 6 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to National CineMedia, Inc. (NASDAQ:NCMI). These stocks are Kaleyra, Inc. (NASDAQ:KLR), Lightinthebox Holding Co Ltd (NYSE:LITB), Ideanomics, Inc. (NASDAQ:IDEX), Southern Missouri Bancorp, Inc. (NASDAQ:SMBC), CapStar Financial Holdings, Inc. (NASDAQ:CSTR), Greenhill & Co., Inc. (NYSE:GHL), and Pure Cycle Corporation (NASDAQ:PCYO). This group of stocks’ market valuations are similar to NCMI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KLR 13 27596 0
LITB 3 3665 1
IDEX 3 264 -5
SMBC 4 7159 1
CSTR 6 10020 -1
GHL 9 15174 -4
PCYO 11 56424 -3
Average 7 17186 -1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $22 million in NCMI’s case. Kaleyra, Inc. (NASDAQ:KLR) is the most popular stock in this table. On the other hand Lightinthebox Holding Co Ltd (NYSE:LITB) is the least popular one with only 3 bullish hedge fund positions. National CineMedia, Inc. (NASDAQ:NCMI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NCMI is 62. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on NCMI as the stock returned 47.1% since the end of Q3 (through 12/8) 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.