A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Novanta Inc. (NASDAQ:NOVT).
Novanta Inc. (NASDAQ:NOVT) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that NOVT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the new hedge fund action surrounding Novanta Inc. (NASDAQ:NOVT).
Hedge fund activity in Novanta Inc. (NASDAQ:NOVT)
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in NOVT over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Novanta Inc. (NASDAQ:NOVT), which was worth $20.2 million at the end of the third quarter. On the second spot was Thames Capital Management which amassed $9.9 million worth of shares. Sandler Capital Management, Royce & Associates, and Citadel Investment Group 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 Thames Capital Management allocated the biggest weight to Novanta Inc. (NASDAQ:NOVT), around 2.96% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, setting aside 0.47 percent of its 13F equity portfolio to NOVT.
Seeing as Novanta Inc. (NASDAQ:NOVT) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few funds who were dropping their positions entirely heading into Q4. It’s worth mentioning that Paul Hondros’s AlphaOne Capital Partners sold off the biggest position of the 750 funds watched by Insider Monkey, comprising close to $1.5 million in stock. David Harding’s fund, Winton Capital Management, also said goodbye to its stock, about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 4 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Novanta Inc. (NASDAQ:NOVT). We will take a look at Colliers International Group Inc (NASDAQ:CIGI), Rexnord Corp (NYSE:RXN), Verint Systems Inc. (NASDAQ:VRNT), and FireEye Inc (NASDAQ:FEYE). This group of stocks’ market valuations resemble NOVT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CIGI | 11 | 714194 | 1 |
| RXN | 19 | 213644 | -1 |
| VRNT | 21 | 268774 | -2 |
| FEYE | 29 | 255297 | 0 |
| Average | 20 | 362977 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $363 million. That figure was $46 million in NOVT’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand Colliers International Group Inc (NASDAQ:CIGI) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Novanta Inc. (NASDAQ:NOVT) is even less popular than CIGI. Hedge funds clearly dropped the ball on NOVT as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on NOVT as the stock returned 14% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
