How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Nucor Corporation (NYSE:NUE).
Nucor Corporation (NYSE:NUE) has seen a decrease in hedge fund sentiment lately. Nucor Corporation (NYSE:NUE) was in 25 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 33. Our calculations also showed that NUE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
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. Keeping this in mind let’s take a look at the fresh hedge fund action encompassing Nucor Corporation (NYSE:NUE).
David E. Shaw of D.E. Shaw
Do Hedge Funds Think NUE Is A Good Stock To Buy Now?
At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in NUE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the number one call position in Nucor Corporation (NYSE:NUE), worth close to $114 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which holds a $27.9 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers with similar optimism consist of Ken Fisher’s Fisher Asset Management, and Benjamin A. Smith’s Laurion Capital Management. In terms of the portfolio weights assigned to each position Arjuna Capital allocated the biggest weight to Nucor Corporation (NYSE:NUE), around 1.76% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, dishing out 0.84 percent of its 13F equity portfolio to NUE.
Because Nucor Corporation (NYSE:NUE) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few money managers that decided to sell off their full holdings in the third quarter. Intriguingly, Todd J. Kantor’s Encompass Capital Advisors cut the largest investment of all the hedgies followed by Insider Monkey, valued at about $9.6 million in stock. Louis Bacon’s fund, Moore Global Investments, also sold off its stock, about $5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 7 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Nucor Corporation (NYSE:NUE). We will take a look at Valero Energy Corporation (NYSE:VLO), Orange SA (NYSE:ORAN), Tyson Foods, Inc. (NYSE:TSN), AMETEK, Inc. (NYSE:AME), Genmab A/S (NASDAQ:GMAB), Stanley Black & Decker, Inc. (NYSE:SWK), and Chewy, Inc. (NYSE:CHWY). This group of stocks’ market valuations are closest to NUE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VLO | 32 | 289108 | -6 |
| ORAN | 3 | 20523 | 0 |
| TSN | 33 | 865195 | 0 |
| AME | 38 | 1320239 | 0 |
| GMAB | 9 | 122715 | 0 |
| SWK | 37 | 776002 | -7 |
| CHWY | 32 | 376172 | -11 |
| Average | 26.3 | 538565 | -3.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $199 million in NUE’s case. AMETEK, Inc. (NYSE:AME) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 3 bullish hedge fund positions. Nucor Corporation (NYSE:NUE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NUE is 52.2. 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 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 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. A small number of hedge funds were also right about betting on NUE as the stock returned 14.6% since the end of the third quarter (through 12/9) and outperformed the market by an even larger margin.
Follow Nucor Corp (NYSE:NUE)
Follow Nucor Corp (NYSE:NUE)
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Disclosure: None. This article was originally published at Insider Monkey.
