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Was The Smart Money Right About Nexa Resources S.A. (NEXA)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Nexa Resources S.A. (NYSE:NEXA) in this article.

Is Nexa Resources S.A. (NYSE:NEXA) a buy right now? Money managers are getting less optimistic. The number of bullish hedge fund bets were trimmed by 2 in recent months. Our calculations also showed that NEXA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). NEXA was in 5 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 7 hedge funds in our database with NEXA holdings at the end of the previous quarter.

Ken Griffin

Ken Griffin of Citadel Investment Group

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the latest hedge fund action surrounding Nexa Resources S.A. (NYSE:NEXA).

How have hedgies been trading Nexa Resources S.A. (NYSE:NEXA)?

At the end of the fourth quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the third quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in NEXA a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Nexa Resources S.A. (NYSE:NEXA), worth close to $4.4 million, amounting to less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is D E Shaw, managed by D. E. Shaw, which holds a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism consist of Peter Muller’s PDT Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to Nexa Resources S.A. (NYSE:NEXA), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0034 percent of its 13F equity portfolio to NEXA.

Due to the fact that Nexa Resources S.A. (NYSE:NEXA) has faced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies that slashed their full holdings last quarter. At the top of the heap, Noam Gottesman’s GLG Partners dropped the largest investment of the 750 funds followed by Insider Monkey, comprising about $0.7 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nexa Resources S.A. (NYSE:NEXA) but similarly valued. These stocks are OneSmart International Education Group Limited (NYSE:ONE), Meridian Bancorp, Inc. (NASDAQ:EBSB), HeadHunter Group PLC (NASDAQ:HHR), and TiVo Corporation (NASDAQ:TIVO). This group of stocks’ market caps are closest to NEXA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ONE 8 71081 0
EBSB 12 94607 1
HHR 6 62887 -2
TIVO 26 102564 3
Average 13 82785 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $5 million in NEXA’s case. TiVo Corporation (NASDAQ:TIVO) is the most popular stock in this table. On the other hand HeadHunter Group PLC (NASDAQ:HHR) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Nexa Resources S.A. (NYSE:NEXA) is even less popular than HHR. Hedge funds dodged a bullet by taking a bearish stance towards NEXA. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. Unfortunately NEXA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); NEXA investors were disappointed as the stock returned -46.5% 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 most of these stocks already outperformed the market so far in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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