Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze NovoCure Limited (NASDAQ:NVCR) from the perspective of those elite funds.
NovoCure Limited (NASDAQ:NVCR) was in 20 hedge funds’ portfolios at the end of the third quarter of 2018. NVCR has experienced an increase in activity from the world’s largest hedge funds in recent months. There were 17 hedge funds in our database with NVCR holdings at the end of the previous quarter. Our calculations also showed that NVCR isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s check out the new hedge fund action encompassing NovoCure Limited (NASDAQ:NVCR).
How have hedgies been trading NovoCure Limited (NASDAQ:NVCR)?
At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the second quarter of 2018. By comparison, 15 hedge funds held shares or bullish call options in NVCR heading into this year. 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, Farallon Capital held the most valuable stake in NovoCure Limited (NASDAQ:NVCR), which was worth $70.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $44 million worth of shares. Moreover, Darsana Capital Partners, Tamarack Capital Management, and Stepstone Group were also bullish on NovoCure Limited (NASDAQ:NVCR), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers were breaking ground themselves. Darsana Capital Partners, managed by Anand Desai, created the most valuable position in NovoCure Limited (NASDAQ:NVCR). Darsana Capital Partners had $43.2 million invested in the company at the end of the quarter. Mike Masters’s Masters Capital Management also made a $10.5 million investment in the stock during the quarter. The following funds were also among the new NVCR investors: David Costen Haley’s HBK Investments, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, and Robert B. Gillam’s McKinley Capital Management.
Let’s check out hedge fund activity in other stocks similar to NovoCure Limited (NASDAQ:NVCR). We will take a look at nVent Electric plc (NYSE:NVT), SLM Corp (NASDAQ:SLM), Prosperity Bancshares, Inc. (NYSE:PB), and Amarin Corporation plc (NASDAQ:AMRN). This group of stocks’ market values match NVCR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVT | 29 | 1208395 | 5 |
| SLM | 19 | 596750 | 0 |
| PB | 6 | 73671 | -4 |
| AMRN | 22 | 1152232 | 7 |
| Average | 19 | 757762 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $758 million. That figure was $285 million in NVCR’s case. nVent Electric plc (NYSE:NVT) is the most popular stock in this table. On the other hand Prosperity Bancshares, Inc. (NYSE:PB) is the least popular one with only 6 bullish hedge fund positions. NovoCure Limited (NASDAQ:NVCR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NVT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
