Nautilus, Inc. (NLS): Hedge Funds Are Snapping Up

Does Nautilus, Inc. (NYSE:NLS) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund sentiment towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

Is Nautilus, Inc. (NYSE:NLS) worth your attention right now? The best stock pickers are taking an optimistic view. The number of long hedge fund bets moved up by 7 lately. NLS was in 27 hedge funds’ portfolios at the end of September. There were 20 hedge funds in our database with NLS holdings at the end of the previous quarter. At the end of this article we will also compare NLS to other stocks, including China Yuchai International Limited (NYSE:CYD), Clayton Williams Energy, Inc. (NASDAQ:CWEI), and Dynagas LNG Partners LP (NYSE:DLNG) to get a better sense of its popularity.

In the eyes of most market participants, hedge funds are viewed as worthless, old financial vehicles of years past. While there are more than 8000 funds in operation today, Our experts hone in on the leaders of this club, around 700 funds. It is estimated that this group of investors orchestrate the majority of the smart money’s total asset base, and by monitoring their matchless picks, Insider Monkey has spotted several investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, let’s view the new action surrounding Nautilus, Inc. (NYSE:NLS).

What does the smart money think about Nautilus, Inc. (NYSE:NLS)?

Heading into Q4, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 35% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in Nautilus, Inc. (NYSE:NLS). At the end of the quarter, the fund had a $20.8 million position in the stock, comprising 0.1% of its 13F portfolio. On Royce & Associates’s heels is Headlands Capital, led by David Park, holding a $17.7 million position; 18.7% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish include Robert B. Gillam’s McKinley Capital Management, Jim Simons’s Renaissance Technologies and Israel Englander’s Millennium Management.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Fisher Asset Management, managed by Ken Fisher, established the largest position in Nautilus, Inc. (NYSE:NLS). The fund reportedly had $2.2 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Mark N. Diker’s Diker Management, Charles Paquelet’s Skylands Capital, and Thomas Bailard’s Bailard Inc.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Nautilus, Inc. (NYSE:NLS) but similarly valued. These stocks are China Yuchai International Limited (NYSE:CYD), Clayton Williams Energy, Inc. (NASDAQ:CWEI), Dynagas LNG Partners LP (NYSE:DLNG), and AeroVironment, Inc. (NASDAQ:AVAV). All of these stocks’ market caps resemble NLS’s market cap.

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 $51 million. Clayton Williams Energy, Inc. (NASDAQ:CWEI) is the most popular stock in this table. On the other hand Dynagas LNG Partners LP (NYSE:DLNG) is the least popular one with only 5 bullish hedge fund positions. Nautilus, Inc. (NYSE:NLS) is clearly more popular, having attracted the attention of 27 hedge funds and investments totalling $75 million at the end of the quarter. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.