In this article we are going to use hedge fund sentiment as a tool and determine whether NI Holdings, Inc. (NASDAQ:NODK) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is NI Holdings (NODK) a good stock to buy now? NODK shareholders have witnessed a decrease in hedge fund sentiment in recent months. NI Holdings, Inc. (NASDAQ:NODK) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. There were 6 hedge funds in our database with NODK positions at the end of the second quarter. Our calculations also showed that NODK 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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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 we’re going to take a look at the recent hedge fund action regarding NI Holdings, Inc. (NASDAQ:NODK).
How have hedgies been trading NI Holdings, Inc. (NASDAQ:NODK)?
At third quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in NODK a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in NI Holdings, Inc. (NASDAQ:NODK) was held by MFP Investors, which reported holding $8.9 million worth of stock at the end of September. It was followed by Newtyn Management with a $8.4 million position. Other investors bullish on the company included AWH Capital, Minerva Advisors, and Renaissance Technologies. In terms of the portfolio weights assigned to each position AWH Capital allocated the biggest weight to NI Holdings, Inc. (NASDAQ:NODK), around 4.43% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, setting aside 2.05 percent of its 13F equity portfolio to NODK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Zebra Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified NODK as a viable investment and initiated a position in the stock.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NI Holdings, Inc. (NASDAQ:NODK) but similarly valued. We will take a look at Caleres Inc (NYSE:CAL), Helix Energy Solutions Group Inc. (NYSE:HLX), Tuscan Holdings Corp. (NASDAQ:THCB), Benefitfocus Inc (NASDAQ:BNFT), Alexco Resource Corp. (NYSE:AXU), AdvanSix Inc. (NYSE:ASIX), and Urstadt Biddle Properties Inc (NYSE:UBA). This group of stocks’ market caps are closest to NODK’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 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $24 million in NODK’s case. Benefitfocus Inc (NASDAQ:BNFT) is the most popular stock in this table. On the other hand Alexco Resource Corp. (NYSE:AXU) is the least popular one with only 2 bullish hedge fund positions. NI Holdings, Inc. (NASDAQ:NODK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NODK is 32.1. 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 NODK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NODK investors were disappointed as the stock returned 4.8% 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.
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Disclosure: None. This article was originally published at Insider Monkey.