Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Nationstar Mortgage Holdings Inc (NYSE:NSM) from the perspective of those successful funds.
Nationstar Mortgage Holdings Inc (NYSE:NSM) investors should be aware of a decrease in hedge fund sentiment recently. 13 hedge funds that we track were long the stock on September 30. There were 15 hedge funds in our database with NSM holdings at the end of the previous quarter. 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 BlackRock Credit All Inc Trust IV (NYSE:BTZ), DineEquity Inc (NYSE:DIN), and Mantech International Corp (NASDAQ:MANT) to gather more data points.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
What have hedge funds been doing with Nationstar Mortgage Holdings Inc (NYSE:NSM)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a 13% drop from the second quarter of 2016, as hedge fund ownership of the stock sinks even further. The graph below displays the number of hedge funds with bullish position in NSM over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Diamond Hill Capital, led by Ric Dillon, holds the number one position in Nationstar Mortgage Holdings Inc (NYSE:NSM). Diamond Hill Capital has a $108 million position in the stock. On Diamond Hill Capital’s heels is Carlson Capital, led by Clint Carlson, which holds a $45 million position. Other members of the smart money that hold long positions include Michael Blitzer’s Kingstown Capital Management, Youlia Miteva’s Proxima Capital Management, and Thomas Ellis and Todd Hammer’s North Run Capital. 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.