Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Nu Skin Enterprises, Inc. (NYSE:NUS)? The smart money sentiment can provide an answer to this question.
Nu Skin Enterprises, Inc. (NYSE:NUS) has experienced an increase in activity from the world's largest hedge funds recently. Nu Skin Enterprises, Inc. (NYSE:NUS) was in 20 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 29. Our calculations also showed that NUS isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's take a gander at the fresh hedge fund action encompassing Nu Skin Enterprises, Inc. (NYSE:NUS).
Do Hedge Funds Think NUS Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NUS over the last 24 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Nu Skin Enterprises, Inc. (NYSE:NUS) was held by Renaissance Technologies, which reported holding $151.7 million worth of stock at the end of June. It was followed by AQR Capital Management with a $57.7 million position. Other investors bullish on the company included Arrowstreet Capital, Intrinsic Edge Capital, and Portolan Capital Management. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to Nu Skin Enterprises, Inc. (NYSE:NUS), around 1.37% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, earmarking 1.03 percent of its 13F equity portfolio to NUS.
As one would reasonably expect, specific money managers were breaking ground themselves. Bridgewater Associates, managed by Ray Dalio, initiated the largest position in Nu Skin Enterprises, Inc. (NYSE:NUS). Bridgewater Associates had $4.8 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new NUS investors: Alec Litowitz and Ross Laser's Magnetar Capital, Bruce Kovner's Caxton Associates LP, and Renee Yao's Neo Ivy Capital.
Let's now review hedge fund activity in other stocks similar to Nu Skin Enterprises, Inc. (NYSE:NUS). We will take a look at FormFactor, Inc. (NASDAQ:FORM), GrowGeneration Corp. (NASDAQ:GRWG), Arcosa, Inc. (NYSE:ACA), Brinker International, Inc. (NYSE:EAT), California Water Service Group (NYSE:CWT), ATA Inc. (NASDAQ:ATAI), and Cimpress plc (NASDAQ:CMPR). This group of stocks' market valuations resemble NUS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FORM,20,167474,3 GRWG,17,128612,-1 ACA,12,155930,-5 EAT,31,353266,0 CWT,9,101040,1 ATAI,20,141677,17 CMPR,19,344801,-2 Average,18.3,198971,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $199 million. That figure was $299 million in NUS's case. Brinker International, Inc. (NYSE:EAT) is the most popular stock in this table. On the other hand California Water Service Group (NYSE:CWT) is the least popular one with only 9 bullish hedge fund positions. Nu Skin Enterprises, Inc. (NYSE:NUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NUS is 51.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately NUS wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NUS were disappointed as the stock returned -27% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.