The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Quanex Building Products Corporation (NYSE:NX).
Is NX a good stock to buy now? Quanex Building Products Corporation (NYSE:NX) investors should be aware of an increase in enthusiasm from smart money in recent months. Quanex Building Products Corporation (NYSE:NX) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 21. Our calculations also showed that NX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s analyze the latest hedge fund action surrounding Quanex Building Products Corporation (NYSE:NX).
Do Hedge Funds Think NX Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in NX 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.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the biggest position in Quanex Building Products Corporation (NYSE:NX). Renaissance Technologies has a $32.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is D. E. Shaw of D E Shaw, with a $7.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Grossman and Glen Schneider’s SG Capital Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position SG Capital Management allocated the biggest weight to Quanex Building Products Corporation (NYSE:NX), around 1.09% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to NX.
As industrywide interest jumped, some big names have been driving this bullishness. SG Capital Management, managed by Ken Grossman and Glen Schneider, established the most outsized position in Quanex Building Products Corporation (NYSE:NX). SG Capital Management had $3.8 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are Peter Muller’s PDT Partners and Donald Sussman’s Paloma Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Quanex Building Products Corporation (NYSE:NX) but similarly valued. These stocks are State Auto Financial Corporation (NASDAQ:STFC), iClick Interactive Asia Group Limited (NASDAQ:ICLK), Relmada Therapeutics, Inc. (NASDAQ:RLMD), Hanger, Inc. (NYSE:HNGR), Impinj, Inc. (NASDAQ:PI), Camtek LTD. (NASDAQ:CAMT), and Orthofix Medical Inc (NASDAQ:OFIX). This group of stocks’ market caps are similar to NX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $59 million in NX’s case. Impinj, Inc. (NASDAQ:PI) is the most popular stock in this table. On the other hand State Auto Financial Corporation (NASDAQ:STFC) is the least popular one with only 8 bullish hedge fund positions. Quanex Building Products Corporation (NYSE:NX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NX is 74.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on NX as the stock returned 18.2% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.