How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding National Oilwell Varco, Inc. (NYSE:NOV) and determine whether hedge funds had an edge regarding this stock.
National Oilwell Varco, Inc. (NYSE:NOV) shareholders have witnessed an increase in enthusiasm from smart money recently. National Oilwell Varco, Inc. (NYSE:NOV) was in 34 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 30 hedge funds in our database with NOV positions at the end of the second quarter. Our calculations also showed that NOV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Peter Algert of Algert Global
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a glance at the key hedge fund action surrounding National Oilwell Varco, Inc. (NYSE:NOV).
Do Hedge Funds Think NOV Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in NOV a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of National Oilwell Varco, Inc. (NYSE:NOV), with a stake worth $534.9 million reported as of the end of September. Trailing Pzena Investment Management was Oldfield Partners, which amassed a stake valued at $103.4 million. Contrarius Investment Management, Holocene Advisors, and Masters 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 Oldfield Partners allocated the biggest weight to National Oilwell Varco, Inc. (NYSE:NOV), around 11.08% of its 13F portfolio. Mountain Lake Investment Management is also relatively very bullish on the stock, setting aside 4.67 percent of its 13F equity portfolio to NOV.
As aggregate interest increased, some big names were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, created the most valuable position in National Oilwell Varco, Inc. (NYSE:NOV). Holocene Advisors had $47.9 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also made a $2.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Jinghua Yan’s TwinBeech Capital, and Peter Algert’s Algert Global.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as National Oilwell Varco, Inc. (NYSE:NOV) but similarly valued. These stocks are Unum Group (NYSE:UNM), MAXIMUS, Inc. (NYSE:MMS), NCR Corporation (NYSE:NCR), American National Group Inc. (NASDAQ:ANAT), Tuya Inc. (NYSE:TUYA), MGIC Investment Corporation (NYSE:MTG), and Certara, Inc. (NASDAQ:CERT). This group of stocks’ market caps are similar to NOV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UNM | 30 | 350040 | 7 |
| MMS | 14 | 89836 | -12 |
| NCR | 28 | 517584 | -10 |
| ANAT | 16 | 93762 | -4 |
| TUYA | 11 | 71032 | 3 |
| MTG | 27 | 298208 | 0 |
| CERT | 15 | 170457 | 8 |
| Average | 20.1 | 227274 | -1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was $983 million in NOV’s case. Unum Group (NYSE:UNM) is the most popular stock in this table. On the other hand Tuya Inc. (NYSE:TUYA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks National Oilwell Varco, Inc. (NYSE:NOV) is more popular among hedge funds. Our overall hedge fund sentiment score for NOV is 89. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on NOV as the stock returned 25.8% since the end of September (through 1/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Nov Inc. (NYSE:NOV)
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Disclosure: None. This article was originally published at Insider Monkey.
