Natura &Co Holding S.A. (NTCO): Are Hedge Funds Right About This Stock?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Natura &Co Holding S.A. (NYSE:NTCO) based on that data.

Natura &Co Holding S.A. (NYSE:NTCO) was in 8 hedge funds’ portfolios at the end of March. NTCO has seen an increase in hedge fund sentiment in recent months. There were 0 hedge funds in our database with NTCO holdings at the end of the previous quarter. Our calculations also showed that NTCO 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.

In the financial world there are dozens of signals stock traders use to grade stocks. A couple of the most useful signals are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite fund managers can outclass the broader indices by a solid margin (see the details here).

Jacob Rothschild - RIT Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the fresh hedge fund action encompassing Natura &Co Holding S.A. (NYSE:NTCO).

What have hedge funds been doing with Natura &Co Holding S.A. (NYSE:NTCO)?

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8 from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in NTCO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NTCO A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Natura &Co Holding S.A. (NYSE:NTCO), with a stake worth $43.5 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $17.5 million. Barington Capital Group, RIT Capital Partners, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to Natura &Co Holding S.A. (NYSE:NTCO), around 9.91% of its 13F portfolio. RIT Capital Partners is also relatively very bullish on the stock, designating 0.45 percent of its 13F equity portfolio to NTCO.

As aggregate interest increased, key money managers have been driving this bullishness. Renaissance Technologies,  assembled the most valuable position in Natura &Co Holding S.A. (NYSE:NTCO). Renaissance Technologies had $43.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $17.5 million investment in the stock during the quarter. The following funds were also among the new NTCO investors: James A. Mitarotonda’s Barington Capital Group, Jacob Rothschild’s RIT Capital Partners, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Natura &Co Holding S.A. (NYSE:NTCO) but similarly valued. These stocks are Proofpoint Inc (NASDAQ:PFPT), Generac Holdings Inc. (NYSE:GNRC), Bunge Limited (NYSE:BG), and Avalara, Inc. (NYSE:AVLR). All of these stocks’ market caps are similar to NTCO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFPT 27 315504 -8
GNRC 29 192057 -3
BG 39 543155 2
AVLR 34 970359 -13
Average 32.25 505269 -5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $505 million. That figure was $67 million in NTCO’s case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Proofpoint Inc (NASDAQ:PFPT) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Natura &Co Holding S.A. (NYSE:NTCO) is even less popular than PFPT. Hedge funds clearly dropped the ball on NTCO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on NTCO as the stock returned 62.6% so far in the second quarter and outperformed the market by an even larger margin.

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