Is Norfolk Southern Corp. (NSC) A Good Stock To Buy?

·5 min read

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Norfolk Southern Corp. (NYSE:NSC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is NSC a good stock to buy? Norfolk Southern Corp. (NYSE:NSC) has experienced a decrease in support from the world's most elite money managers lately. Norfolk Southern Corp. (NYSE:NSC) was in 46 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 58. There were 58 hedge funds in our database with NSC positions at the end of the second quarter. Our calculations also showed that NSC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Phill Gross Adage Capital Phillip Gross
Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let's take a peek at the recent hedge fund action surrounding Norfolk Southern Corp. (NYSE:NSC).

Do Hedge Funds Think NSC Is A Good Stock To Buy Now?

At Q3's end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. On the other hand, there were a total of 47 hedge funds with a bullish position in NSC a year ago. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Is NSC A Good Stock To Buy?
Is NSC A Good Stock To Buy?

The largest stake in Norfolk Southern Corp. (NYSE:NSC) was held by Millennium Management, which reported holding $171.7 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $152.4 million position. Other investors bullish on the company included Adage Capital Management, Renaissance Technologies, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Factorial Partners allocated the biggest weight to Norfolk Southern Corp. (NYSE:NSC), around 2.95% of its 13F portfolio. Alight Capital is also relatively very bullish on the stock, dishing out 2.77 percent of its 13F equity portfolio to NSC.

Due to the fact that Norfolk Southern Corp. (NYSE:NSC) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers that decided to sell off their full holdings last quarter. Intriguingly, Andrew Immerman and Jeremy Schiffman's Palestra Capital Management dumped the largest stake of the "upper crust" of funds followed by Insider Monkey, comprising close to $218 million in stock. Doug Silverman and Alexander Klabin's fund, Senator Investment Group, also said goodbye to its stock, about $86.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 12 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Norfolk Southern Corp. (NYSE:NSC) but similarly valued. We will take a look at Dominion Energy Inc. (NYSE:D), America Movil SAB de CV (NYSE:AMX), NIO Inc. (NYSE:NIO), FedEx Corporation (NYSE:FDX), América Móvil, S.A.B. de C.V. (NYSE:AMOV), Northrop Grumman Corporation (NYSE:NOC), and NetEase, Inc (NASDAQ:NTES). All of these stocks' market caps match NSC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position D,27,545194,-7 AMX,11,167723,-2 NIO,30,1138194,-4 FDX,49,1682204,-12 AMOV,1,300,0 NOC,29,910523,-13 NTES,32,2326768,-11 Average,25.6,967272,-7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $967 million. That figure was $1049 million in NSC's case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand América Móvil, S.A.B. de C.V. (NYSE:AMOV) is the least popular one with only 1 bullish hedge fund positions. Norfolk Southern Corp. (NYSE:NSC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NSC is 63.7. 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. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on NSC as the stock returned 11.3% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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