Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Nexa Resources S.A. (NYSE:NEXA) to find out whether there were any major changes in hedge funds' views.
Is Nexa Resources S.A. (NYSE:NEXA) a safe investment today? Investors who are in the know were becoming more confident. The number of long hedge fund positions inched up by 2 in recent months. Nexa Resources S.A. (NYSE:NEXA) was in 5 hedge funds' portfolios at the end of March. The all time high for this statistic is 12. Our calculations also showed that NEXA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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Peter Rathjens of Arrowstreet Capital
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Do Hedge Funds Think NEXA Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NEXA over the last 23 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in Nexa Resources S.A. (NYSE:NEXA), worth close to $5.2 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $0.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Israel Englander's Millennium Management and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Nexa Resources S.A. (NYSE:NEXA), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.0003 percent of its 13F equity portfolio to NEXA.
Now, key hedge funds were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Nexa Resources S.A. (NYSE:NEXA). Arrowstreet Capital had $0.2 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $0.2 million position during the quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Nexa Resources S.A. (NYSE:NEXA) but similarly valued. We will take a look at StepStone Group Inc. (NASDAQ:STEP), Harsco Corporation (NYSE:HSC), Kinnate Biopharma Inc. (NASDAQ:KNTE), Materion Corp (NYSE:MTRN), Score Media and Gaming Inc. (NASDAQ:SCR), COMPASS Pathways Plc (NASDAQ:CMPS), and BJ's Restaurants, Inc. (NASDAQ:BJRI). All of these stocks' market caps are similar to NEXA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STEP,13,69812,5 HSC,10,15844,-2 KNTE,16,428288,-2 MTRN,17,108590,5 SCR,12,44339,12 CMPS,13,87585,-7 BJRI,11,97218,0 Average,13.1,121668,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $7 million in NEXA's case. Materion Corp (NYSE:MTRN) is the most popular stock in this table. On the other hand Harsco Corporation (NYSE:HSC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Nexa Resources S.A. (NYSE:NEXA) is even less popular than HSC. Our overall hedge fund sentiment score for NEXA is 19.5. 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. 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 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th but managed to beat the market again by 6.1 percentage points. Unfortunately NEXA wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); NEXA investors were disappointed as the stock returned -15% since the end of the first quarter (through 6/18) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.