In this article we will check out the progression of hedge fund sentiment towards Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is NGVC a good stock to buy now? Money managers were becoming hopeful. The number of bullish hedge fund bets rose by 1 in recent months. Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 13. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NGVC 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). There were 12 hedge funds in our database with NGVC positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Now let’s take a peek at the new hedge fund action surrounding Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC).
Do Hedge Funds Think NGVC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NGVC over the last 21 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC), which was worth $8.1 million at the end of the third quarter. On the second spot was GMT Capital which amassed $7.6 million worth of shares. Royce & Associates, Millennium Management, and Arrowstreet Capital 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 GMT Capital allocated the biggest weight to Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC), around 0.55% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to NGVC.
As industrywide interest jumped, specific money managers have jumped into Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) headfirst. Engineers Gate Manager, managed by Greg Eisner, initiated the most outsized position in Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC). Engineers Gate Manager had $0.1 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $0.1 million position during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) but similarly valued. These stocks are EMX Royalty Corporation (NYSE:EMX), Old Second Bancorp Inc. (NASDAQ:OSBC), U.S. Silica Holdings Inc (NYSE:SLCA), Fly Leasing Ltd (NYSE:FLY), Ruhnn Holding Limited (NASDAQ:RUHN), GreenPower Motor Company Inc. (NASDAQ:GP), and Matrix Service Co (NASDAQ:MTRX). This group of stocks’ market caps match NGVC’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 7.9 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $25 million in NGVC’s case. U.S. Silica Holdings Inc (NYSE:SLCA) is the most popular stock in this table. On the other hand GreenPower Motor Company Inc. (NASDAQ:GP) is the least popular one with only 2 bullish hedge fund positions. Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NGVC is 75.3. 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 NGVC as the stock returned 58.1% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.