Should You Buy Nuveen Floating Rate Income Opportuntiy Fund (JRO)?

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Nuveen Floating Rate Income Opportuntiy Fund (NYSE:JRO).

Is Nuveen Floating Rate Income Opportuntiy Fund (NYSE:JRO) worth your attention right now? Prominent investors are becoming more confident. The number of long hedge fund positions increased by 3 recently. Our calculations also showed that JRO isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

We’re going to take a look at the key hedge fund action encompassing Nuveen Floating Rate Income Opportuntiy Fund (NYSE:JRO).

How are hedge funds trading Nuveen Floating Rate Income Opportuntiy Fund (NYSE:JRO)?

Heading into the fourth quarter of 2018, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JRO over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds JRO Positions

Among these funds, Laurion Capital Management held the most valuable stake in Nuveen Floating Rate Income Opportuntiy Fund (NYSE:JRO), which was worth $3.2 million at the end of the third quarter. On the second spot was Mariner Investment Group which amassed $1 million worth of shares. Moreover, Saba Capital, Horizon Asset Management, and Clough Capital Partners were also bullish on Nuveen Floating Rate Income Opportuntiy Fund (NYSE:JRO), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Mariner Investment Group, managed by William Michaelcheck, created the largest position in Nuveen Floating Rate Income Opportuntiy Fund (NYSE:JRO). Mariner Investment Group had $1 million invested in the company at the end of the quarter. Boaz Weinstein’s Saba Capital also initiated a $0.8 million position during the quarter. The only other fund with a brand new JRO position is Charles Clough’s Clough Capital Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nuveen Floating Rate Income Opportuntiy Fund (NYSE:JRO) but similarly valued. We will take a look at Verrica Pharmaceuticals Inc. (NASDAQ:VRCA), Republic First Bancorp, Inc. (NASDAQ:FRBK), Western Asset Mortgage Capital Corp (NYSE:WMC), and Zagg Inc (NASDAQ:ZAGG). This group of stocks’ market valuations are closest to JRO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRCA 8 83168 1
FRBK 8 47232 0
WMC 6 26960 0
ZAGG 12 31797 -3
Average 8.5 47289 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $6 million in JRO’s case. Zagg Inc (NASDAQ:ZAGG) is the most popular stock in this table. On the other hand Western Asset Mortgage Capital Corp (NYSE:WMC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Nuveen Floating Rate Income Opportuntiy Fund (NYSE:JRO) is even less popular than WMC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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