Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility and underperformance. The time period between the end of June 2015 and the end of June 2016 was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have been underperforming the large-cap indices. However, things have dramatically changed over the last 5 months. Small-cap stocks reversed their misfortune and beat the large cap indices by almost 11 percentage points since the end of June. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Nucor Corporation (NYSE:NUE).
A total of 29 funds tracked by Insider Monkey were bullish on Nucor Corporation at the end of the third quarter of 2016. The company’s shareholders have witnessed a decrease in hedge fund interest, as there had been 32 funds with NUE holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Smith & Nephew plc (ADR) (NYSE:SNN), Concho Resources Inc. (NYSE:CXO), and Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG) to gather more data points.
Follow Nucor Corp (NYSE:NUE)
Follow Nucor Corp (NYSE:NUE)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, we’re going to take a gander at the key action surrounding Nucor Corporation (NYSE:NUE).
What does the smart money think about Nucor Corporation (NYSE:NUE)?
As stated earlier, heading into the fourth quarter of 2016, 29 funds tracked by Insider Monkey held long positions in this stock, which represents a decline of 9% from the end of June. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, AQR Capital Management, led by Cliff Asness, holds the biggest position in Nucor Corporation (NYSE:NUE). AQR Capital Management has a $80.6 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by John Overdeck and David Siegel’s Two Sigma Advisors, which holds a $61.5 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions consist of Zach Schreiber’s Point State Capital, Jim Simons’ Renaissance Technologies, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Seeing as Nucor Corporation (NYSE:NUE) has faced falling interest from the smart money, it’s easy to see that there is a sect of money managers that slashed their positions entirely by the end of the third quarter. Intriguingly, Principal Global Investors’ Columbus Circle Investors dumped the largest investment of the 700 funds watched by Insider Monkey, valued at close to $70.1 million in stock, and Bruce Kovner’s Caxton Associates LP was right behind this move, as the fund sold off about $24.9 million worth of shares.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Nucor Corporation (NYSE:NUE) but similarly valued. We will take a look at Smith & Nephew plc (ADR) (NYSE:SNN), Concho Resources Inc. (NYSE:CXO), Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG), and POSCO (ADR) (NYSE:PKX). All of these stocks’ market caps resemble NUE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNN | 11 | 233062 | 1 |
| CXO | 34 | 714443 | -4 |
| SHG | 7 | 14087 | -2 |
| PKX | 14 | 100738 | -1 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $416 million in NUE’s case. Concho Resources Inc. (NYSE:CXO) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (ADR) (NYSE:SHG) is the least popular one with only seven 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, Concho Resources Inc. (NYSE:CXO) might be a better candidate to consider a long position.
