It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.
Hedge fund interest in Nutraceutical Int’l Corp. (NASDAQ:NUTR) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Fidus Investment Corp (NASDAQ:FDUS), FuelCell Energy, Inc. (NASDAQ:FCEL), and Nature’s Sunshine Prod. (NASDAQ:NATR) to gather more data points.
Keeping this in mind, we’re going to take a look at the recent action surrounding Nutraceutical Int’l Corp. (NASDAQ:NUTR).
What have hedge funds been doing with Nutraceutical Int’l Corp. (NASDAQ:NUTR)?
Heading into Q4, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the number one position in Nutraceutical Int’l Corp. (NASDAQ:NUTR). Renaissance Technologies has a $9.2 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second largest stake is held by Royce & Associates, managed by Chuck Royce, which holds a $7.1 million position; less than 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism consist of Michael Murphy and Daniel Donoghue’s Discovery Group, and John Overdeck and David Siegel’s Two Sigma Advisors.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks similar to Nutraceutical Int’l Corp. (NASDAQ:NUTR). These stocks are Fidus Investment Corp (NASDAQ:FDUS), FuelCell Energy, Inc. (NASDAQ:FCEL), Nature’s Sunshine Prod. (NASDAQ:NATR), and Foamix Pharmaceuticals Ltd (NASDAQ:FOMX). This group of stocks’ market valuations resemble NUTR’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $21 million in NUTR’s case. Foamix Pharmaceuticals Ltd (NASDAQ:FOMX) is the most popular stock in this table. On the other hand Fidus Investment Corp (NASDAQ:FDUS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Nutraceutical Int’l Corp. (NASDAQ:NUTR) is as less popular as FDUS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.