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Is nVent Electric plc (NVT) Going To Burn These Hedge Funds ?

It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 24.4% during the first 9 months of 2019 and outperformed the S&P 500 ETF by 4 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards nVent Electric plc (NYSE:NVT) changed during the first quarter.

nVent Electric plc (NYSE:NVT) has seen an increase in hedge fund sentiment lately. NVT was in 28 hedge funds’ portfolios at the end of the second quarter of 2019. There were 25 hedge funds in our database with NVT positions at the end of the previous quarter. Our calculations also showed that NVT isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TRIAN PARTNERS

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the fresh hedge fund action surrounding nVent Electric plc (NYSE:NVT).

What does smart money think about nVent Electric plc (NYSE:NVT)?

Heading into the third quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NVT over the last 16 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.

NVT_oct2019

The largest stake in nVent Electric plc (NYSE:NVT) was held by Trian Partners, which reported holding $336 million worth of stock at the end of March. It was followed by Iridian Asset Management with a $98 million position. Other investors bullish on the company included Glenview Capital, AQR Capital Management, and Balyasny Asset Management.

As industrywide interest jumped, specific money managers have jumped into nVent Electric plc (NYSE:NVT) headfirst. Iridian Asset Management, managed by David Cohen and Harold Levy, created the most valuable position in nVent Electric plc (NYSE:NVT). Iridian Asset Management had $98 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also initiated a $2.8 million position during the quarter. The other funds with brand new NVT positions are Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Renaissance Technologies, and Anand Parekh’s Alyeska Investment Group.

Let’s go over hedge fund activity in other stocks similar to nVent Electric plc (NYSE:NVT). We will take a look at MKS Instruments, Inc. (NASDAQ:MKSI), FirstCash, Inc. (NASDAQ:FCFS), ALLETE Inc (NYSE:ALE), and Itau CorpBanca (NYSE:ITCB). This group of stocks’ market caps are similar to NVT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MKSI 19 402127 -3
FCFS 15 172032 3
ALE 24 261066 6
ITCB 1 4019 0
Average 14.75 209811 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $776 million in NVT’s case. ALLETE Inc (NYSE:ALE) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks nVent Electric plc (NYSE:NVT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NVT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NVT were disappointed as the stock returned -10.5% during the third quarter 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 many of these stocks already outperformed the market in Q3.

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

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