In this article we are going to use hedge fund sentiment as a tool and determine whether Nu Skin Enterprises, Inc. (NYSE:NUS) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Nu Skin Enterprises, Inc. (NYSE:NUS) was in 19 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 29. NUS has experienced a decrease in support from the world's most elite money managers in recent months. There were 22 hedge funds in our database with NUS positions at the end of the fourth quarter. Our calculations also showed that NUS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Sander Gerber of Hudson Bay Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Keeping this in mind let's review the recent 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 second quarter of 2021, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the fourth quarter of 2020. On the other hand, there were a total of 18 hedge funds with a bullish position in NUS a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Nu Skin Enterprises, Inc. (NYSE:NUS) was held by Renaissance Technologies, which reported holding $142.3 million worth of stock at the end of December. It was followed by AQR Capital Management with a $61.1 million position. Other investors bullish on the company included Arrowstreet Capital, Intrinsic Edge Capital, and SG Capital Management. In terms of the portfolio weights assigned to each position SG Capital Management allocated the biggest weight to Nu Skin Enterprises, Inc. (NYSE:NUS), around 6.5% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, earmarking 2.53 percent of its 13F equity portfolio to NUS.
Seeing as Nu Skin Enterprises, Inc. (NYSE:NUS) has experienced falling interest from hedge fund managers, it's easy to see that there lies a certain "tier" of funds that decided to sell off their full holdings heading into Q2. It's worth mentioning that Sander Gerber's Hudson Bay Capital Management dumped the largest stake of all the hedgies watched by Insider Monkey, valued at an estimated $3.8 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund dropped about $2.5 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds heading into Q2.
Let's go over hedge fund activity in other stocks similar to Nu Skin Enterprises, Inc. (NYSE:NUS). These stocks are Sanmina Corporation (NASDAQ:SANM), Rush Enterprises, Inc. (NASDAQ:RUSHA), Harmony Gold Mining Co. (NYSE:HMY), Evertec Inc (NYSE:EVTC), The Cheesecake Factory Incorporated (NASDAQ:CAKE), Range Resources Corp. (NYSE:RRC), and Allegheny Technologies Incorporated (NYSE:ATI). All of these stocks' market caps resemble NUS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SANM,16,156709,-3 RUSHA,17,78465,0 HMY,8,93178,-2 EVTC,21,217187,-1 CAKE,18,172335,0 RRC,26,415439,1 ATI,20,294940,-7 Average,18,204036,-1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $328 million in NUS's case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand Harmony Gold Mining Co. (NYSE:HMY) is the least popular one with only 8 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 52.2. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 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 1.7% since the end of March (through 7/16) 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.