Do Hedge Funds Love NewHold Investment Corp. (NHIC)?

Is NewHold Investment Corp. (NASDAQ:NHIC) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is NewHold Investment Corp. (NASDAQ:NHIC) a buy here? Prominent investors were getting more optimistic. The number of long hedge fund bets increased by 11 in recent months. NewHold Investment Corp. (NASDAQ:NHIC) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that NHIC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
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Video: Watch our video about the top 5 most popular hedge fund stocks.

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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Jeffrey Altman of Owl Creek Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to take a gander at the new hedge fund action surrounding NewHold Investment Corp. (NASDAQ:NHIC).

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

At third quarter’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11 from the previous quarter. The graph below displays the number of hedge funds with bullish position in NHIC over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Magnetar Capital was the largest shareholder of NewHold Investment Corp. (NASDAQ:NHIC), with a stake worth $15.1 million reported as of the end of September. Trailing Magnetar Capital was Owl Creek Asset Management, which amassed a stake valued at $5 million. Glazer Capital, Millennium Management, and Scopus Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Owl Creek Asset Management allocated the biggest weight to NewHold Investment Corp. (NASDAQ:NHIC), around 0.33% of its 13F portfolio. Magnetar Capital is also relatively very bullish on the stock, setting aside 0.27 percent of its 13F equity portfolio to NHIC.

Now, key money managers have jumped into NewHold Investment Corp. (NASDAQ:NHIC) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, assembled the biggest position in NewHold Investment Corp. (NASDAQ:NHIC). Magnetar Capital had $15.1 million invested in the company at the end of the quarter. Jeffrey Altman’s Owl Creek Asset Management also made a $5 million investment in the stock during the quarter. The other funds with brand new NHIC positions are Paul Glazer’s Glazer Capital, Israel Englander’s Millennium Management, and Alexander Mitchell’s Scopus Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as NewHold Investment Corp. (NASDAQ:NHIC) but similarly valued. These stocks are Natural Resource Partners LP (NYSE:NRP), CIM Commercial Trust Corporation (NASDAQ:CMCT), Coastal Financial Corporation (NASDAQ:CCB), Tuniu Corporation (NASDAQ:TOUR), Mid Penn Bancorp, Inc. (NASDAQ:MPB), Emerald Holding, Inc. (NYSE:EEX), and Monroe Capital Corp (NASDAQ:MRCC). This group of stocks’ market valuations are closest to NHIC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NRP 2 6814 0
CMCT 4 11308 0
CCB 2 12266 0
TOUR 2 9175 0
MPB 3 3094 -1
EEX 6 1661 -2
MRCC 4 2335 0
Average 3.3 6665 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.3 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $44 million in NHIC’s case. Emerald Holding, Inc. (NYSE:EEX) is the most popular stock in this table. On the other hand Natural Resource Partners LP (NYSE:NRP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks NewHold Investment Corp. (NASDAQ:NHIC) is more popular among hedge funds. Our overall hedge fund sentiment score for NHIC is 90. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Unfortunately NHIC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NHIC were disappointed as the stock returned 2.1% since the end of the third quarter (through 12/8) 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 most of these stocks already outperformed the market in 2020.

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