Here is What Hedge Funds Think About Novartis AG (NVS)

At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Novartis AG (NYSE:NVS) makes for a good investment right now.

Is Novartis AG (NYSE:NVS) ready to rally soon? Prominent investors were betting on the stock. The number of long hedge fund bets advanced by 3 recently. Novartis AG (NYSE:NVS) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 34. Our calculations also showed that NVS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the eyes of most investors, hedge funds are assumed to be underperforming, old financial tools of yesteryear. While there are greater than 8000 funds trading today, Our experts choose to focus on the moguls of this club, around 850 funds. These investment experts watch over most of all hedge funds’ total asset base, and by following their finest stock picks, Insider Monkey has identified numerous investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. With all of this in mind we’re going to go over the latest hedge fund action surrounding Novartis AG (NYSE:NVS).

Do Hedge Funds Think NVS Is A Good Stock To Buy Now?

At second quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NVS over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the largest position in Novartis AG (NYSE:NVS). Fisher Asset Management has a $909 million position in the stock, comprising 0.6% of its 13F portfolio. On Fisher Asset Management’s heels is Catherine D. Wood of ARK Investment Management, with a $389.5 million position; 0.7% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish consist of Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Osterweis Capital Management allocated the biggest weight to Novartis AG (NYSE:NVS), around 1.29% of its 13F portfolio. ARK Investment Management is also relatively very bullish on the stock, setting aside 0.72 percent of its 13F equity portfolio to NVS.

Consequently, specific money managers have jumped into Novartis AG (NYSE:NVS) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in Novartis AG (NYSE:NVS). Two Sigma Advisors had $172.7 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $1 million position during the quarter. The following funds were also among the new NVS investors: Karim Abbadi and Edward McBride’s Centiva Capital and Donald Sussman’s Paloma Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Novartis AG (NYSE:NVS) but similarly valued. We will take a look at PepsiCo, Inc. (NASDAQ:PEP), Chevron Corporation (NYSE:CVX), AbbVie Inc (NYSE:ABBV), Thermo Fisher Scientific Inc. (NYSE:TMO), Merck & Co., Inc. (NYSE:MRK), Broadcom Inc (NASDAQ:AVGO), and Novo Nordisk A/S (NYSE:NVO). This group of stocks’ market caps match NVS’s market cap.

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As you can see these stocks had an average of 61.6 hedge funds with bullish positions and the average amount invested in these stocks was $4871 million. That figure was $1798 million in NVS’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 20 bullish hedge fund positions. Novartis AG (NYSE:NVS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NVS is 28.9. 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 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 gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately NVS wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NVS investors were disappointed as the stock returned -6.9% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.