The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards NIC Inc. (NASDAQ:EGOV).
Is EGOV a good stock to buy now? NIC Inc. (NASDAQ:EGOV) was in 14 hedge funds' portfolios at the end of September. The all time high for this statistic is 22. EGOV has seen a decrease in activity from the world's largest hedge funds lately. There were 16 hedge funds in our database with EGOV holdings at the end of June. Our calculations also showed that EGOV 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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.
Dmitry Balyasny of Balyasny Asset Managemnet
Dmitry Balyasny of Balyasny 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 let's check out the recent hedge fund action encompassing NIC Inc. (NASDAQ:EGOV).
Do Hedge Funds Think EGOV Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EGOV 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, Renaissance Technologies was the largest shareholder of NIC Inc. (NASDAQ:EGOV), with a stake worth $41.3 million reported as of the end of September. Trailing Renaissance Technologies was GLG Partners, which amassed a stake valued at $14.2 million. Arrowstreet Capital, D E Shaw, and Two Sigma Advisors 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 Winton Capital Management allocated the biggest weight to NIC Inc. (NASDAQ:EGOV), around 0.07% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to EGOV.
Judging by the fact that NIC Inc. (NASDAQ:EGOV) has witnessed declining sentiment from the aggregate hedge fund industry, it's easy to see that there exists a select few hedgies who sold off their full holdings in the third quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP sold off the largest investment of all the hedgies followed by Insider Monkey, valued at close to $1.9 million in stock. Michael Gelband's fund, ExodusPoint Capital, also dropped its stock, about $0.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as NIC Inc. (NASDAQ:EGOV) but similarly valued. We will take a look at Itau CorpBanca (NYSE:ITCB), Colony Capital Inc (NYSE:CLNY), M/I Homes Inc (NYSE:MHO), Livent Corporation (NYSE:LTHM), The Providence Service Corporation (NASDAQ:PRSC), Glu Mobile Inc. (NASDAQ:GLUU), and Capitol Federal Financial, Inc. (NASDAQ:CFFN). This group of stocks' market valuations are closest to EGOV's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITCB,1,1163,0 CLNY,24,188771,8 MHO,18,115813,3 LTHM,20,61214,1 PRSC,15,320755,3 GLUU,26,169466,-9 CFFN,14,80710,3 Average,16.9,133985,1.3 [/table]
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $95 million in EGOV's case. Glu Mobile Inc. (NASDAQ:GLUU) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. NIC Inc. (NASDAQ:EGOV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EGOV is 48.1. 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. A small number of hedge funds were also right about betting on EGOV as the stock returned 23.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
