The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded ServiceNow Inc (NYSE:NOW) and determine whether the smart money was really smart about this stock.
Is ServiceNow Inc (NYSE:NOW) a healthy stock for your portfolio? Hedge funds were buying. The number of long hedge fund positions improved by 1 recently. Our calculations also showed that NOW isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). ServiceNow Inc (NYSE:NOW) was in 86 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 92. There were 85 hedge funds in our database with NOW positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most traders, hedge funds are assumed to be underperforming, old investment vehicles of the past. While there are over 8000 funds in operation today, Our researchers choose to focus on the upper echelon of this club, around 850 funds. Most estimates calculate that this group of people have their hands on the lion’s share of the smart money’s total capital, and by keeping an eye on their finest picks, Insider Monkey has identified various investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Chase Coleman of Tiger Global
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a gander at the recent hedge fund action encompassing ServiceNow Inc (NYSE:NOW).
How are hedge funds trading ServiceNow Inc (NYSE:NOW)?
At the end of the second quarter, a total of 86 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 1% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NOW over the last 20 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Lone Pine Capital held the most valuable stake in ServiceNow Inc (NYSE:NOW), which was worth $724.7 million at the end of the third quarter. On the second spot was Melvin Capital Management which amassed $340.8 million worth of shares. SCGE Management, Tiger Global Management LLC, and GQG Partners 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 Praesidium Investment Management Company allocated the biggest weight to ServiceNow Inc (NYSE:NOW), around 12.05% of its 13F portfolio. Center Lake Capital is also relatively very bullish on the stock, dishing out 10.71 percent of its 13F equity portfolio to NOW.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Tiger Eye Capital, managed by Ben Gambill, established the most valuable position in ServiceNow Inc (NYSE:NOW). Tiger Eye Capital had $20.2 million invested in the company at the end of the quarter. Joe DiMenna’s ZWEIG DIMENNA PARTNERS also made a $15.9 million investment in the stock during the quarter. The other funds with brand new NOW positions are Robert B. Gillam’s McKinley Capital Management, Blair Baker’s Precept Capital Management, and Larry Chen and Terry Zhang’s Tairen Capital.
Let’s check out hedge fund activity in other stocks similar to ServiceNow Inc (NYSE:NOW). These stocks are American Express Company (NYSE:AXP), Morgan Stanley (NYSE:MS), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Mondelez International Inc (NASDAQ:MDLZ), Altria Group Inc (NYSE:MO), and Zoom Video Communications, Inc. (NASDAQ:ZM). This group of stocks’ market values resemble NOW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AXP | 54 | 17635296 | -3 |
| MS | 61 | 4357171 | -9 |
| VRTX | 54 | 3477688 | -2 |
| KOF | 5 | 358015 | -2 |
| MDLZ | 54 | 2594722 | 0 |
| MO | 43 | 1289543 | -3 |
| ZM | 48 | 6758811 | 1 |
| Average | 45.6 | 5210178 | -2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.6 hedge funds with bullish positions and the average amount invested in these stocks was $5210 million. That figure was $4950 million in NOW’s case. Morgan Stanley (NYSE:MS) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks ServiceNow Inc (NYSE:NOW) is more popular among hedge funds. Our overall hedge fund sentiment score for NOW is 84. 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 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 28.2% in 2020 through August 24th and still beat the market by 20.6 percentage points. Unfortunately NOW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NOW were disappointed as the stock returned 10.6% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.
