In this article we will take a look at whether hedge funds think Newtek Business Services Corp (NASDAQ:NEWT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Newtek Business Services Corp (NASDAQ:NEWT) has experienced an increase in hedge fund sentiment in recent months. Our calculations also showed that NEWT isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Louis Navellier of Navellier & Associates[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to go over the latest hedge fund action encompassing Newtek Business Services Corp (NASDAQ:NEWT).
What does smart money think about Newtek Business Services Corp (NASDAQ:NEWT)?
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in NEWT a year ago. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Newtek Business Services Corp (NASDAQ:NEWT), with a stake worth $2 million reported as of the end of September. Trailing Millennium Management was McKinley Capital Management, which amassed a stake valued at $1.9 million. Two Sigma Advisors, Navellier & Associates, and SG Capital 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 SG Capital Management allocated the biggest weight to Newtek Business Services Corp (NASDAQ:NEWT), around 0.32% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to NEWT.
As one would reasonably expect, key money managers have jumped into Newtek Business Services Corp (NASDAQ:NEWT) headfirst. SG Capital Management, managed by Ken Grossman and Glen Schneider, established the most valuable position in Newtek Business Services Corp (NASDAQ:NEWT). SG Capital Management had $0.7 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Frederick DiSanto's Ancora Advisors.
Let's now review hedge fund activity in other stocks similar to Newtek Business Services Corp (NASDAQ:NEWT). We will take a look at Citizens & Northern Corporation (NASDAQ:CZNC), Marine Products Corp. (NYSE:MPX), FLEX LNG Ltd. (NYSE:FLNG), and Kimball Electronics Inc (NASDAQ:KE). All of these stocks' market caps are similar to NEWT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CZNC,2,4939,0 MPX,6,8879,1 FLNG,1,11,0 KE,9,13971,-4 Average,4.5,6950,-0.75 [/table]
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $8 million in NEWT's case. Kimball Electronics Inc (NASDAQ:KE) is the most popular stock in this table. On the other hand FLEX LNG Ltd. (NYSE:FLNG) is the least popular one with only 1 bullish hedge fund positions. Newtek Business Services Corp (NASDAQ:NEWT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on NEWT as the stock returned 37.9% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
