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Is Nucor Corporation (NUE) Going to Burn These Hedge Funds?

We can judge whether Nucor Corporation (NYSE:NUE) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, research shows that these picks historically outperformed the market when we factor in known risk factors.

Is Nucor Corporation (NYSE:NUE) a buy right now? Investors who are in the know are getting more optimistic. The number of long hedge fund bets rose by 2 in recent months. Our calculations also showed that NUE isn’t among the 30 most popular stocks among hedge funds. NUE was in 31 hedge funds’ portfolios at the end of September. There were 29 hedge funds in our database with NUE holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

Let’s review the fresh hedge fund action regarding Nucor Corporation (NYSE:NUE).

How have hedgies been trading Nucor Corporation (NYSE:NUE)?

At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the second quarter of 2018. On the other hand, there were a total of 33 hedge funds with a bullish position in NUE at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

NUE_dec2018

The largest stake in Nucor Corporation (NYSE:NUE) was held by Luminus Management, which reported holding $146.2 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $85.3 million position. Other investors bullish on the company included East Side Capital (RR Partners), AQR Capital Management, and Millennium Management.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Tudor Investment Corp, managed by Paul Tudor Jones, assembled the biggest position in Nucor Corporation (NYSE:NUE). Tudor Investment Corp had $5 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $4.3 million position during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, Louis Bacon’s Moore Global Investments, and Joel Greenblatt’s Gotham Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Nucor Corporation (NYSE:NUE) but similarly valued. These stocks are W.W. Grainger, Inc. (NYSE:GWW), AutoZone, Inc. (NYSE:AZO), AmerisourceBergen Corporation (NYSE:ABC), and Arista Networks Inc (NYSE:ANET). All of these stocks’ market caps are similar to NUE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GWW 30 617996 7
AZO 30 920242 -2
ABC 32 608745 -4
ANET 22 574815 0
Average 28.5 680450 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $680 million. That figure was $554 million in NUE’s case. AmerisourceBergen Corporation (NYSE:ABC) is the most popular stock in this table. On the other hand Arista Networks Inc (NYSE:ANET) is the least popular one with only 22 bullish hedge fund positions. Nucor Corporation (NYSE:NUE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ABC might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

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