During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) and see how the stock is affected by the recent hedge fund activity.
Is Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) a buy here? Hedge funds are becoming hopeful. The number of bullish hedge fund bets went up by 12 in recent months. Our calculations also showed that NCLH isn’t among the 30 most popular stocks among hedge funds. NCLH was in 41 hedge funds’ portfolios at the end of the third quarter of 2018. There were 29 hedge funds in our database with NCLH holdings at the end of the previous quarter.
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 the 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 market by 18 percentage points since