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Were Hedge Funds Right About Dumping Navient Corporation (NAVI)?

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by 4 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Navient Corporation (NASDAQ:NAVI).

Navient Corporation (NASDAQ:NAVI) was in 26 hedge funds’ portfolios at the end of the second quarter of 2019. NAVI investors should be aware of a decrease in activity from the world’s largest hedge funds of late. There were 31 hedge funds in our database with NAVI positions at the end of the previous quarter. Our calculations also showed that NAVI isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

OMEGA ADVISORS Leon Cooperman

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the latest hedge fund action surrounding Navient Corporation (NASDAQ:NAVI).

How have hedgies been trading Navient Corporation (NASDAQ:NAVI)?

Heading into the third quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NAVI over the last 16 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with NAVI Positions

Among these funds, Canyon Capital Advisors held the most valuable stake in Navient Corporation (NASDAQ:NAVI), which was worth $350.1 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $34.5 million worth of shares. Moreover, D E Shaw, Omega Advisors, and GLG Partners were also bullish on Navient Corporation (NASDAQ:NAVI), allocating a large percentage of their portfolios to this stock.

Because Navient Corporation (NASDAQ:NAVI) has experienced falling interest from the smart money, it’s easy to see that there lies a certain “tier” of hedgies that elected to cut their positions entirely by the end of the second quarter. At the top of the heap, Clint Carlson’s Carlson Capital dropped the largest position of the 750 funds tracked by Insider Monkey, worth an estimated $13.9 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund cut about $3.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 5 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Navient Corporation (NASDAQ:NAVI) but similarly valued. These stocks are Federated Investors Inc (NYSE:FII), AmeriGas Partners, L.P. (NYSE:APU), Switch, Inc. (NYSE:SWCH), and Darling Ingredients Inc. (NYSE:DAR). This group of stocks’ market caps resemble NAVI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FII 22 274576 9
APU 8 80334 2
SWCH 13 220988 -3
DAR 16 193087 -3
Average 14.75 192246 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $490 million in NAVI’s case. Federated Investors Inc (NYSE:FII) is the most popular stock in this table. On the other hand AmeriGas Partners, L.P. (NYSE:APU) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Navient Corporation (NASDAQ:NAVI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NAVI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NAVI were disappointed as the stock returned -5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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

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