Nesco Holdings, Inc. (NSCO): Hedge Fund Sentiment Still At All Time Low

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Nesco Holdings, Inc. (NYSE:NSCO) based on that data and determine whether they were really smart about the stock.

Hedge fund interest in Nesco Holdings, Inc. (NYSE:NSCO) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare NSCO to other stocks including Village Farms International, Inc. (NASDAQ:VFF), Covenant Transportation Group, Inc. (NASDAQ:CVTI), and Parke Bancorp, Inc. (NASDAQ:PKBK) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Nesco Holdings, Inc. (NYSE:NSCO).

What does smart money think about Nesco Holdings, Inc. (NYSE:NSCO)?

At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NSCO over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NSCO A Good Stock To Buy?

Among these funds, Alyeska Investment Group held the most valuable stake in Nesco Holdings, Inc. (NYSE:NSCO), which was worth $6.9 million at the end of the third quarter. On the second spot was Millennium Management which amassed $6.6 million worth of shares. Alyeska Investment Group, Angelo Gordon & Co, and Brigade Capital 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 Alyeska Investment Group allocated the biggest weight to Nesco Holdings, Inc. (NYSE:NSCO), around 0.14% of its 13F portfolio. Angelo Gordon & Co is also relatively very bullish on the stock, designating 0.14 percent of its 13F equity portfolio to NSCO.

Due to the fact that Nesco Holdings, Inc. (NYSE:NSCO) has faced falling interest from the smart money, it’s safe to say that there was a specific group of hedge funds who sold off their entire stakes heading into Q4. It’s worth mentioning that Karim Abbadi and Edward McBride’s Centiva Capital sold off the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $0.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $0.1 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Nesco Holdings, Inc. (NYSE:NSCO). These stocks are Village Farms International, Inc. (NASDAQ:VFF), Covenant Transportation Group, Inc. (NASDAQ:CVTI), Parke Bancorp, Inc. (NASDAQ:PKBK), and Blue Apron Holdings, Inc. (NYSE:APRN). This group of stocks’ market caps match NSCO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VFF 3 2006 -2
CVTI 9 7495 0
PKBK 4 9977 1
APRN 10 24852 1
Average 6.5 11083 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $12 million in NSCO’s case. Blue Apron Holdings, Inc. (NYSE:APRN) is the most popular stock in this table. On the other hand Village Farms International, Inc. (NASDAQ:VFF) is the least popular one with only 3 bullish hedge fund positions. Nesco Holdings, Inc. (NYSE:NSCO) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on NSCO, though not to the same extent, as the stock returned 22.6% during the second quarter and outperformed the market as well.

Follow Custom Truck One Source Inc. (NYSE:CTOS)

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