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Navient Corp (NAVI) Falls On Guidance Cut: Did Hedge Funds See It Coming?

Navient Corp (NASDAQ:NAVI)‘s shares have slid by 9.59% today to $16.60 per share after the firm reduced its guidance for the full year and forecast lower-than-expected earnings for the second quarter, which it is scheduled to report next Tuesday. Core earnings per share is forecast by the company to be $0.40 per share in the second quarter. For the full 2015 fiscal year, EPS is expected to be $1.85. These are well below what analysts were expecting, as consensus estimates had earnings coming in at $0.55 per share for the second quarter and $2.19 per share for the full fiscal year. Navient says that the reduction of its earnings forecast comes as the firm cut net interest income as costs of funds burgeoned. The student loans company also said that it eliminated additional private loan acquisitions from the outlook. Navient’s year-to-date returns now stand at a loss of 23.23%, well below the returns of the credit services industry as a whole, which has returned 3.88% year-to-date according to Morningstar data.

 Navient Corp (NAVI), NASDAQ:NAVI, Yahoo Finance,

It appears that hedge funds tracked by Insider Monkey saw this negative development coming up for Navient Corp (NASDAQ:NAVI)’s second quarter and 2015 fiscal year. By the end of March, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, down from 29 following the previous quarter. The aggregate value of holdings owned by those 25 hedge funds also decreased by 19.14% to $648.6 million by March 31. This is slightly offset by the 5.92% decline in the stock’s price in the first three months of 2015, but still a rather large capital pull out by the smart money.

Let’s take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research, we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand, the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith in large-cap stocks. In forward tests since August 2012, these top small-cap stocks beat the market by an impressive 80 percentage points, returning over 135% (read the details here). Hence, a retail investor needs to isolate himself from the herd and take advantage of the best growth opportunities in the market by concentrating on small-cap stocks.

Furthermore, Insider Monkey tracks insider transactions of buying or selling of shares. This tells us whether insiders are also bullish on their firms’ shares. While there were no purchases by insiders of NAVI recorded in the first six months of the year, there have been a few sales. The most recent sale was by Executive Vice President Timothy Hynes, who sold 296 shares on May 1.

Let’s view the fresh hedge fund activity surrounding Navient Corp now.

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