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Nucor Corporation (NUE): Are Hedge Funds Right About This Stock?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtNucor Corporation (NYSE:NUE) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Nucor Corporation (NYSE:NUE) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds’ portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Baker Hughes Company (NYSE:BKR), UDR, Inc. (NYSE:UDR), and SK Telecom Co., Ltd. (NYSE:SKM) to gather more data points. Our calculations also showed that NUE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

To most traders, hedge funds are assumed to be underperforming, outdated financial tools of the past. While there are more than 8000 funds trading today, Our experts choose to focus on the moguls of this club, about 850 funds. These investment experts direct most of all hedge funds’ total capital, and by keeping track of their matchless equity investments, Insider Monkey has formulated many investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind let’s take a peek at the latest hedge fund action surrounding Nucor Corporation (NYSE:NUE).

Hedge fund activity in Nucor Corporation (NYSE:NUE)

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in NUE a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Nucor Corporation (NYSE:NUE), which was worth $17.7 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $15 million worth of shares. AQR Capital Management, Adage Capital Management, and Millennium Management 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 Arjuna Capital allocated the biggest weight to Nucor Corporation (NYSE:NUE), around 0.3% of its 13F portfolio. Elkhorn Partners is also relatively very bullish on the stock, setting aside 0.25 percent of its 13F equity portfolio to NUE.

Judging by the fact that Nucor Corporation (NYSE:NUE) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that slashed their entire stakes heading into Q4. Interestingly, Kamyar Khajavi’s MIK Capital cut the biggest investment of the 750 funds watched by Insider Monkey, totaling close to $8 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $2.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Nucor Corporation (NYSE:NUE). We will take a look at Baker Hughes Company (NYSE:BKR), UDR, Inc. (NYSE:UDR), SK Telecom Co., Ltd. (NYSE:SKM), and Quest Diagnostics Incorporated (NYSE:DGX). All of these stocks’ market caps resemble NUE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BKR 30 281145 -7
UDR 19 249574 -2
SKM 5 117014 -1
DGX 38 383257 7
Average 23 257748 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $96 million in NUE’s case. Quest Diagnostics Incorporated (NYSE:DGX) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 5 bullish hedge fund positions. Nucor Corporation (NYSE:NUE) 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. 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 beat the market by 15.5 percentage points. Unfortunately NUE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NUE were disappointed as the stock returned 16.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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