Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Nomura Holdings, Inc. (NYSE:NMR) to find out whether there were any major changes in hedge funds’ views.
Is Nomura Holdings, Inc. (NYSE:NMR) a good stock to buy now? Hedge funds were in a bullish mood. The number of bullish hedge fund bets inched up by 1 in recent months. Nomura Holdings, Inc. (NYSE:NMR) was in 6 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. Our calculations also showed that NMR 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 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 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. Keeping this in mind let’s check out the recent hedge fund action regarding Nomura Holdings, Inc. (NYSE:NMR).
How have hedgies been trading Nomura Holdings, Inc. (NYSE:NMR)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NMR over the last 21 quarters. With the smart money’s capital changing hands, there exists a few notable 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 Nomura Holdings, Inc. (NYSE:NMR), which was worth $8.8 million at the end of the third quarter. On the second spot was D E Shaw which amassed $4.6 million worth of shares. LMR Partners, 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 LMR Partners allocated the biggest weight to Nomura Holdings, Inc. (NYSE:NMR), around 0.05% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to NMR.
Consequently, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in Nomura Holdings, Inc. (NYSE:NMR). Arrowstreet Capital had $1.7 million invested in the company at the end of the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Nomura Holdings, Inc. (NYSE:NMR) but similarly valued. These stocks are Royal Caribbean Group (NYSE:RCL), Sun Communities Inc (NYSE:SUI), Extra Space Storage, Inc. (NYSE:EXR), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Cardinal Health, Inc. (NYSE:CAH), and IDEX Corporation (NYSE:IEX). This group of stocks’ market valuations resemble NMR’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 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $679 million. That figure was $18 million in NMR’s case. Cardinal Health, Inc. (NYSE:CAH) is the most popular stock in this table. On the other hand C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Nomura Holdings, Inc. (NYSE:NMR) is even less popular than CHRW. Our overall hedge fund sentiment score for NMR is 28.5. 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. Hedge funds clearly dropped the ball on NMR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on NMR as the stock returned 12.7% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.