Navigators Group Inc (NAVG): Are Hedge Funds Right About This Stock?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Navigators Group Inc (NASDAQ:NAVG) has experienced an increase in enthusiasm from smart money lately. 14 hedge funds that we track were long the stock on September 30. There were 11 hedge funds in our database with NAVG holdings at the end of the previous quarter. At the end of this article we will also compare NAVG to other stocks including WisdomTree Investments, Inc. (NASDAQ:WETF), Genesco Inc. (NYSE:GCO), and USANA Health Sciences, Inc. (NYSE:USNA) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What have hedge funds been doing with Navigators Group Inc (NASDAQ:NAVG)?

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 27% jump from the second quarter of 2016, as the number of hedge fund positions has now doubled in the last 2 quarters. On the other hand, there were a total of 11 hedge funds with a bullish position in NAVG at the beginning of this year. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Ric Dillon’s Diamond Hill Capital has the largest position in Navigators Group Inc (NASDAQ:NAVG), worth close to $83.4 million. The second most bullish fund manager is Jim Simons’ Renaissance Technologies, with an $11.5 million position. Other professional money managers that are bullish contain Matthew Halbower’s Pentwater Capital Management, Cliff Asness’ AQR Capital Management, and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As one would reasonably expect, key hedge funds were breaking ground themselves. Pentwater Capital Management assembled the biggest position in Navigators Group Inc (NASDAQ:NAVG). Pentwater Capital Management had $9.8 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new NAVG investors: George Hall’s Clinton Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks similar to Navigators Group Inc (NASDAQ:NAVG). We will take a look at WisdomTree Investments, Inc. (NASDAQ:WETF), Genesco Inc. (NYSE:GCO), USANA Health Sciences, Inc. (NYSE:USNA), and Portola Pharmaceuticals Inc (NASDAQ:PTLA). All of these stocks’ market caps match NAVG’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $126 million in NAVG’s case. Portola Pharmaceuticals Inc (NASDAQ:PTLA) is the most popular stock in this table. On the other hand WisdomTree Investments, Inc. (NASDAQ:WETF) is the least popular one with only 9 bullish hedge fund positions. Navigators Group Inc (NASDAQ:NAVG) 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. In this regard PTLA might be a better candidate to consider taking a long position in.

Disclosure: None