Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like NCI Building Systems, Inc. (NYSE:NCS).
Is NCI Building Systems, Inc. (NYSE:NCS) the right investment to pursue these days? Money managers are getting more bullish. The number of long hedge fund bets improved by 8 lately. At the end of this article, we will also compare NCI Building Systems, Inc. (NYSE:NCS) to other stocks, including Net 1 UEPS Technologies Inc (NASDAQ:UEPS), Constant Contact Inc (NASDAQ:CTCT), and Innophos Holdings, Inc. (NASDAQ:IPHS) to get a better sense of its popularity.
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In the financial world, there are many indicators market participants use to value publicly traded companies. A duo of the most underrated indicators are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can beat the market by a solid margin (see the details here).
Keeping this in mind, let’s take a look at the latest action regarding NCI Building Systems, Inc. (NYSE:NCS).
How are hedge funds trading NCI Building Systems, Inc. (NYSE:NCS)?
At the end of September, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 47% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund and institutional investor database, Rutabaga Capital Management, managed by Peter Schliemann, holds the number one position in NCI Building Systems, Inc. (NYSE:NCS). Rutabaga Capital Management has a $20.8 million position in the stock, comprising 2.6% of its 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, holding a $16.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism encompass Israel Englander’s Millennium Management, Robert Hockett’s Covalent Capital Partners, and Renaissance Technologies.
As aggregate interest increased, key hedge funds were breaking ground themselves. Ellington, managed by Mike Vranos, assembled the most outsized position in NCI Building Systems, Inc. (NYSE:NCS). Ellington had $0.7 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $0.7 million position during the quarter. The following funds were also among the new NCS investors: Neil Chriss’ Hutchin Hill Capital, Joel Greenblatt’s Gotham Asset Management, and Ken Brodkowitz and Mike Vermut’s Newland Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NCI Building Systems, Inc. (NYSE:NCS) but similarly valued. We will take a look at Net 1 UEPS Technologies Inc (NASDAQ:UEPS), Constant Contact Inc (NASDAQ:CTCT), Innophos Holdings, Inc. (NASDAQ:IPHS), and Saia Inc (NASDAQ:SAIA). This group of stocks’ market caps matches NCI Building Systems, Inc. (NYSE:NCS)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UEPS | 21 | 241741 | 2 |
| CTCT | 17 | 134366 | 1 |
| IPHS | 22 | 68600 | 8 |
| SAIA | 20 | 162892 | 9 |
As you can see, these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $79 million in NCI Building Systems, Inc. (NYSE:NCS)’s case. Innophos Holdings, Inc. (NASDAQ:IPHS) is the most popular stock in this table. On the other hand, Constant Contact Inc (NASDAQ:CTCT) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks, NCI Building Systems, Inc. (NYSE:NCS) is more popular among hedge funds. 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.
