Is NICE Stock A Buy or Sell?
With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was NICE Ltd (NASDAQ:NICE).
Is NICE stock a buy? Hedge fund interest in NICE Ltd (NASDAQ:NICE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NICE isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare NICE to other stocks including GDS Holdings Limited (NASDAQ:GDS), Ubiquiti Inc. (NYSE:UI), and CMS Energy Corporation (NYSE:CMS) to get a better sense of its popularity.
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 124 percentage points since March 2017 (see the details here).
Peter Rathjens of Arrowstreet Capital
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Do Hedge Funds Think NICE Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in NICE a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, RGM Capital, managed by Robert G. Moses, holds the largest position in NICE Ltd (NASDAQ:NICE). RGM Capital has a $166.5 million position in the stock, comprising 7.3% of its 13F portfolio. On RGM Capital's heels is Steve Cohen of Point72 Asset Management, with a $102.4 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Amish Mehta's SQN Investors, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Ken Fisher's Fisher Asset Management. In terms of the portfolio weights assigned to each position Blackcrane Capital allocated the biggest weight to NICE Ltd (NASDAQ:NICE), around 14.87% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, setting aside 7.26 percent of its 13F equity portfolio to NICE.
Since NICE Ltd (NASDAQ:NICE) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there exists a select few money managers that decided to sell off their full holdings by the end of the fourth quarter. Intriguingly, Spencer M. Waxman's Shannon River Fund Management dumped the largest position of the 750 funds watched by Insider Monkey, worth an estimated $13.9 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund dumped about $1 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as NICE Ltd (NASDAQ:NICE) but similarly valued. These stocks are GDS Holdings Limited (NASDAQ:GDS), Ubiquiti Inc. (NYSE:UI), CMS Energy Corporation (NYSE:CMS), China Unicom (Hong Kong) Limited (NYSE:CHU), CNH Industrial NV (NYSE:CNHI), Bio-Rad Laboratories, Inc. (NYSE:BIO), and Fox Corporation (NASDAQ:FOXA). This group of stocks' market values resemble NICE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GDS,39,2874120,-8 UI,19,319456,-1 CMS,24,580991,-5 CHU,6,42062,0 CNHI,16,442785,-2 BIO,42,1117926,-6 FOXA,39,1293023,7 Average,26.4,952909,-2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $953 million. That figure was $726 million in NICE's case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 6 bullish hedge fund positions. NICE Ltd (NASDAQ:NICE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NICE is 62.8. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately NICE wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); NICE investors were disappointed as the stock returned -17.2% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.
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