Is NTST A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of NetSTREIT Corp. (NYSE:NTST) based on that data.

Is NTST a good stock to buy now? Investors who are in the know were taking a bullish view. The number of bullish hedge fund bets improved by 10 in recent months. NetSTREIT Corp. (NYSE:NTST) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that NTST 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.

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.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

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 peek at the latest hedge fund action encompassing NetSTREIT Corp. (NYSE:NTST).

Do Hedge Funds Think NTST Is A Good Stock To Buy Now?

At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10 from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NTST 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.

Is NTST A Good Stock To Buy?

More specifically, Long Pond Capital was the largest shareholder of NetSTREIT Corp. (NYSE:NTST), with a stake worth $49.5 million reported as of the end of September. Trailing Long Pond Capital was Millennium Management, which amassed a stake valued at $16.1 million. Citadel Investment Group, Forward Management, and Balyasny Asset 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 Long Pond Capital allocated the biggest weight to NetSTREIT Corp. (NYSE:NTST), around 1.9% of its 13F portfolio. Hill Winds Capital is also relatively very bullish on the stock, designating 1.74 percent of its 13F equity portfolio to NTST.

As one would reasonably expect, specific money managers were breaking ground themselves. Long Pond Capital, managed by John Khoury, initiated the most outsized position in NetSTREIT Corp. (NYSE:NTST). Long Pond Capital had $49.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $16.1 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, J. Alan Reid, Jr.’s Forward Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NetSTREIT Corp. (NYSE:NTST) but similarly valued. We will take a look at Horizon Bancorp (NASDAQ:HBNC), Vectrus Inc (NYSE:VEC), Universal Insurance Holdings, Inc. (NYSE:UVE), RPT Realty (NYSE:RPT), Koppers Holdings Inc. (NYSE:KOP), G1 Therapeutics, Inc. (NASDAQ:GTHX), and Mechel PAO (NYSE:MTL). This group of stocks’ market caps are closest to NTST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HBNC 12 16845 -2
VEC 17 39968 1
UVE 14 29470 -2
RPT 17 25016 3
KOP 12 15724 1
GTHX 13 30837 2
MTL 3 1788 0
Average 12.6 22807 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $93 million in NTST’s case. Vectrus Inc (NYSE:VEC) is the most popular stock in this table. On the other hand Mechel PAO (NYSE:MTL) is the least popular one with only 3 bullish hedge fund positions. NetSTREIT Corp. (NYSE:NTST) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NTST is 50. 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 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately NTST wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NTST investors were disappointed as the stock returned 4.9% since the end of September (through 12/8) 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.