The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. In this article we are going to take a look at smart money sentiment towards NCR Corporation (NYSE:NCR).
Is NCR a good stock to buy? Hedge fund interest in NCR Corporation (NYSE:NCR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NCR 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cogent Communications Holdings Inc. (NASDAQ:CCOI), TechnipFMC plc (NYSE:FTI), and Sabra Health Care REIT Inc (NASDAQ:SBRA) to gather more data points.
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 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. Keeping this in mind let’s take a peek at the recent hedge fund action encompassing NCR Corporation (NYSE:NCR).
Do Hedge Funds Think NCR Is A Good Stock To Buy Now?
At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in NCR a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Light Street Capital, managed by Glen Kacher, holds the most valuable position in NCR Corporation (NYSE:NCR). Light Street Capital has a $61.6 million position in the stock, comprising 1.9% of its 13F portfolio. Sitting at the No. 2 spot is Glenn W. Welling of Engaged Capital, with a $46.2 million position; the fund has 4.8% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish consist of Seth Rosen’s Nitorum Capital, David Einhorn’s Greenlight Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Beach Point Capital Management allocated the biggest weight to NCR Corporation (NYSE:NCR), around 4.89% of its 13F portfolio. Engaged Capital is also relatively very bullish on the stock, setting aside 4.77 percent of its 13F equity portfolio to NCR.
Judging by the fact that NCR Corporation (NYSE:NCR) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few funds that elected to cut their positions entirely in the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $9.1 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dropped its stock, about $0.9 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NCR Corporation (NYSE:NCR) but similarly valued. These stocks are Cogent Communications Holdings Inc. (NASDAQ:CCOI), TechnipFMC plc (NYSE:FTI), Sabra Health Care REIT Inc (NASDAQ:SBRA), Acacia Communications, Inc. (NASDAQ:ACIA), Stitch Fix, Inc. (NASDAQ:SFIX), Equinox Gold Corp. (NYSE:EQX), and Telecom Argentina S.A. (NYSE:TEO). All of these stocks’ market caps resemble NCR’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 23 hedge funds with bullish positions and the average amount invested in these stocks was $356 million. That figure was $310 million in NCR’s case. Acacia Communications, Inc. (NASDAQ:ACIA) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 5 bullish hedge fund positions. NCR Corporation (NYSE:NCR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NCR is 77.9. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on NCR as the stock returned 54.3% since the end of Q3 (through 12/18) 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.