Should You Buy Nelnet, Inc. (NNI)?

Is Nelnet, Inc. (NYSE:NNI) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.

Is Nelnet, Inc. (NYSE:NNI) a splendid investment right now? Prominent investors are taking a bullish view. The number of long hedge fund bets advanced by 1 lately. Our calculations also showed that nni isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Joe Huber - Huber Capital Management

We’re going to analyze the key hedge fund action encompassing Nelnet, Inc. (NYSE:NNI).

Hedge fund activity in Nelnet, Inc. (NYSE:NNI)

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in NNI over the last 13 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

No of Hedge Funds with NNI Positions

The largest stake in Nelnet, Inc. (NYSE:NNI) was held by Magnolia Capital Fund, which reported holding $39 million worth of stock at the end of September. It was followed by GLG Partners with a $12.9 million position. Other investors bullish on the company included AQR Capital Management, Huber Capital Management, and Renaissance Technologies.

As aggregate interest increased, key hedge funds were breaking ground themselves. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, created the most outsized position in Nelnet, Inc. (NYSE:NNI). Springbok Capital had $0 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Nelnet, Inc. (NYSE:NNI) but similarly valued. We will take a look at Shake Shack Inc (NYSE:SHAK), Avalara, Inc. (NYSE:AVLR), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), and Patterson Companies, Inc. (NASDAQ:PDCO). All of these stocks’ market caps are closest to NNI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SHAK 22 293850 1
AVLR 15 595541 1
PPBI 9 105444 -1
PDCO 29 285433 1
Average 18.75 320067 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $320 million. That figure was $84 million in NNI’s case. Patterson Companies, Inc. (NASDAQ:PDCO) is the most popular stock in this table. On the other hand Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) is the least popular one with only 9 bullish hedge fund positions. Nelnet, Inc. (NYSE:NNI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PDCO might be a better candidate to consider a long position.

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