Is Novo Nordisk A/S (ADR) (NYSE:NVO) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Novo Nordisk A/S (ADR) (NYSE:NVO) undervalued? The best stock pickers are turning less bullish. The number of long hedge fund positions were trimmed by 1 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Intel Corporation (NASDAQ:INTC), Comcast Corporation (NASDAQ:CMCSA), and International Business Machines Corp. (NYSE:IBM) to gather more data points.
Follow Novo Nordisk A S (NYSE:NVO)
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In the financial world there are a lot of signals stock traders can use to assess their holdings. Some of the most innovative signals are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best fund managers can beat their index-focused peers by a healthy margin (see the details here).
Keeping this in mind, let’s take a glance at the recent action surrounding Novo Nordisk A/S (ADR) (NYSE:NVO).
What does the smart money think about Novo Nordisk A/S (ADR) (NYSE:NVO)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies holds the number one position in Novo Nordisk A/S (ADR) (NYSE:NVO). Renaissance Technologies has a $714.4 million position in the stock, comprising 1.7% of its 13F portfolio. Coming in second is Fisher Asset Management, managed by Ken Fisher, which holds a $632 million position; 1.3% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Tom Gayner’s Markel Gayner Asset Management and Richard Driehaus’ Driehaus Capital.
Judging by the fact that Novo Nordisk A/S (ADR) (NYSE:NVO) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few fund managers that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Peter Muller’s PDT Partners cut the largest stake of all the hedgies monitored by Insider Monkey, worth about $3.7 million in stock. David Costen Haley’s fund, HBK Investments, also sold off its stock, about $3.2 million worth.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Novo Nordisk A/S (ADR) (NYSE:NVO) but similarly valued. We will take a look at Intel Corporation (NASDAQ:INTC), Comcast Corporation (NASDAQ:CMCSA), International Business Machines Corp. (NYSE:IBM), and Merck & Co., Inc. (NYSE:MRK). This group of stocks’ market valuations resemble NVO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INTC | 45 | 3672313 | -3 |
| CMCSA | 80 | 8566242 | 4 |
| IBM | 63 | 13494699 | 4 |
| MRK | 62 | 2250136 | -12 |
As you can see these stocks had an average of 63 hedge funds with bullish positions and the average amount invested in these stocks was $6.70 billion. That figure was $1.83 billion in NVO’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table, while Intel Corporation (NASDAQ:INTC) is the least popular one with only 45 bullish hedge fund positions. Compared to these stocks, Novo Nordisk A/S (ADR) (NYSE:NVO) is even less popular than INTC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
