In this article you are going to find out whether hedge funds think Newtek Business Services Corp (NASDAQ:NEWT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Newtek Business Services (NEWT) a good stock to buy now? NEWT has experienced a decrease in hedge fund sentiment recently. Newtek Business Services Corp (NASDAQ:NEWT) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. There were 6 hedge funds in our database with NEWT positions at the end of the second quarter. Our calculations also showed that NEWT 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.
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How are hedge funds trading Newtek Business Services Corp (NASDAQ:NEWT)?
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NEWT over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Azora Capital, managed by Ravi Chopra, holds the number one position in Newtek Business Services Corp (NASDAQ:NEWT). Azora Capital has a $3.5 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by McKinley Capital Management, managed by Robert B. Gillam, which holds a $2.7 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other peers that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, and Frederick DiSanto’s Ancora Advisors. In terms of the portfolio weights assigned to each position Azora Capital allocated the biggest weight to Newtek Business Services Corp (NASDAQ:NEWT), around 0.44% of its 13F portfolio. McKinley Capital Management is also relatively very bullish on the stock, designating 0.21 percent of its 13F equity portfolio to NEWT.
Judging by the fact that Newtek Business Services Corp (NASDAQ:NEWT) has experienced a decline in interest from the smart money, we can see that there lies a certain “tier” of funds that slashed their entire stakes last quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $0.8 million in stock. Louis Navellier’s fund, Navellier & Associates, also dropped its stock, about $0.5 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Newtek Business Services Corp (NASDAQ:NEWT). These stocks are Hingham Institution for Savings (NASDAQ:HIFS), Grid Dynamics Holdings, Inc. (NASDAQ:GDYN), Marinus Pharmaceuticals Inc (NASDAQ:MRNS), Franklin Street Properties Corp. (NYSE:FSP), Designer Brands Inc. (NYSE:DBI), Eros STX Global Corporation (NYSE:ESGC), and Bonanza Creek Energy Inc (NYSE:BCEI). This group of stocks’ market valuations are closest to NEWT’s market valuation.
|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 10.9 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $8 million in NEWT’s case. Bonanza Creek Energy Inc (NYSE:BCEI) is the most popular stock in this table. On the other hand Hingham Institution for Savings (NASDAQ:HIFS) is the least popular one with only 1 bullish hedge fund positions. Newtek Business Services Corp (NASDAQ:NEWT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NEWT is 28. 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 negative signal and 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately NEWT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NEWT investors were disappointed as the stock returned -1.6% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.