Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH)? The smart money sentiment can provide an answer to this question.
Is NCLH a good stock to buy? Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) was in 36 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that NCLH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Matthew Halbower of Pentwater Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s analyze the fresh hedge fund action regarding Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH).
Do Hedge Funds Think NCLH Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in NCLH a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Miller Value Partners, managed by Bill Miller, holds the largest position in Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH). Miller Value Partners has a $96.1 million position in the stock, comprising 2.2% of its 13F portfolio. On Miller Value Partners’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $85.7 million call position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism include Matthew Halbower’s Pentwater Capital Management, Richard Merage’s MIG Capital and Doug Silverman and Alexander Klabin’s Senator Investment Group. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), around 5.99% of its 13F portfolio. MIG Capital is also relatively very bullish on the stock, earmarking 4.75 percent of its 13F equity portfolio to NCLH.
Judging by the fact that Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies that decided to sell off their full holdings last quarter. At the top of the heap, Renaissance Technologies cut the biggest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $9.2 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund sold off about $5.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 7 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH). We will take a look at Guidewire Software Inc (NYSE:GWRE), Hill-Rom Holdings, Inc. (NYSE:HRC), Intellia Therapeutics, Inc. (NASDAQ:NTLA), Levi Strauss & Co. (NYSE:LEVI), Chegg Inc (NYSE:CHGG), Hubbell Incorporated (NYSE:HUBB), and Wynn Resorts, Limited (NASDAQ:WYNN). This group of stocks’ market caps match NCLH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GWRE | 26 | 2005849 | -1 |
| HRC | 46 | 1410210 | 24 |
| NTLA | 37 | 1620289 | -4 |
| LEVI | 26 | 225120 | -4 |
| CHGG | 39 | 514158 | 1 |
| HUBB | 18 | 571249 | 3 |
| WYNN | 32 | 282672 | -5 |
| Average | 32 | 947078 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $947 million. That figure was $502 million in NCLH’s case. Hill-Rom Holdings, Inc. (NYSE:HRC) is the most popular stock in this table. On the other hand Hubbell Incorporated (NYSE:HUBB) is the least popular one with only 18 bullish hedge fund positions. Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NCLH is 55.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately NCLH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NCLH were disappointed as the stock returned -27% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH)
Follow Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH)
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Disclosure: None. This article was originally published at Insider Monkey.
