The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards National Instruments Corporation (NASDAQ:NATI).
Is National Instruments Corporation (NASDAQ:NATI) a buy right now? Investors who are in the know are taking a bearish view. The number of long hedge fund bets were cut by 1 in recent months. Our calculations also showed that NATI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the fresh hedge fund action regarding National Instruments Corporation (NASDAQ:NATI).
How are hedge funds trading National Instruments Corporation (NASDAQ:NATI)?
Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NATI over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Southport Management, managed by Jonathan Dawson, holds the most valuable position in National Instruments Corporation (NASDAQ:NATI). Southport Management has a $496.2 million position in the stock, comprising 5.5% of its 13F portfolio. Coming in second is Royce & Associates, led by Chuck Royce, holding a $52.7 million position; 0.7% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism encompass Brian Bares’s Bares Capital Management, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Southport Management allocated the biggest weight to National Instruments Corporation (NASDAQ:NATI), around 5.53% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, setting aside 5.22 percent of its 13F equity portfolio to NATI.
Judging by the fact that National Instruments Corporation (NASDAQ:NATI) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few fund managers who sold off their positions entirely by the end of the first quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $29.2 million in stock, and Leon Shaulov’s Maplelane Capital was right behind this move, as the fund dropped about $2.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as National Instruments Corporation (NASDAQ:NATI) but similarly valued. These stocks are MDU Resources Group Inc (NYSE:MDU), Science Applications International Corp (NYSE:SAIC), JOYY Inc. (NASDAQ:YY), and LPL Financial Holdings Inc (NASDAQ:LPLA). All of these stocks’ market caps match NATI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $378 million. That figure was $706 million in NATI’s case. Science Applications International Corp (NYSE:SAIC) is the most popular stock in this table. On the other hand JOYY Inc. (NASDAQ:YY) is the least popular one with only 15 bullish hedge fund positions. National Instruments Corporation (NASDAQ:NATI) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately NATI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NATI were disappointed as the stock returned 17.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.