Should You Avoid Navient Corp (NAVI)?

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Navient Corp (NASDAQ:NAVI).

Navient Corp (NASDAQ:NAVI) was in 30 hedge funds’ portfolios at the end of September. NAVI has seen a decrease in hedge fund sentiment lately. There were 32 hedge funds in our database with NAVI 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 Neurocrine Biosciences, Inc. (NASDAQ:NBIX), USG Corporation (NYSE:USG), and FNFV Group (NYSE:FNFV) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

Hedge fund activity in Navient Corp (NASDAQ:NAVI)

At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 6% from one quarter earlier. There are 8 fewer hedge funds long the stock than there were a year earlier as of September 30. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Leon Cooperman’s Omega Advisors has the largest position in Navient Corp (NASDAQ:NAVI), worth close to $163.8 million and accounting for 5.1% of its total 13F portfolio. The second most bullish fund is D E Shaw, which holds a $74.2 million position. Remaining peers that are bullish contain Michael Blitzer’s Kingstown Capital Management, Cliff Asness’ AQR Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Because Navient Corp (NASDAQ:NAVI) has witnessed declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of funds who were dropping their entire stakes by the end of the third quarter. It’s worth mentioning that Clint Carlson’s Carlson Capital cut the largest stake of all the hedgies monitored by Insider Monkey, worth about $42.9 million in stock. Neil Chriss’ fund, Hutchin Hill Capital, also said goodbye to its stock, about $8.4 million worth of NAVI shares. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Navient Corp (NASDAQ:NAVI) but similarly valued. These stocks are Neurocrine Biosciences, Inc. (NASDAQ:NBIX), USG Corporation (NYSE:USG), FNFV Group (NYSE:FNFV), and Portland General Electric Company (NYSE:POR). This group of stocks’ market valuations match NAVI’s market valuation.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $580 million. That figure was $367 million in NAVI’s case. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is the most popular stock in this table. On the other hand Portland General Electric Company (NYSE:POR) is the least popular one with only 13 bullish hedge fund positions. Navient Corp (NASDAQ:NAVI) 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 NBIX might be a better candidate to consider a long position in.

Disclosure: None