Is Nutanix, Inc. (NTNX) Going to Burn These Hedge Funds?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Nutanix, Inc. (NASDAQ:NTNX).

Is Nutanix, Inc. (NASDAQ:NTNX) going to take off soon? The best stock pickers were in a bearish mood. The number of long hedge fund bets went down by 1 recently. Nutanix, Inc. (NASDAQ:NTNX) was in 28 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 39. Our calculations also showed that NTNX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to check out the new hedge fund action surrounding Nutanix, Inc. (NASDAQ:NTNX).

David Blood of Generation Investment Management

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

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards NTNX over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, David Blood and Al Gore’s Generation Investment Management has the number one position in Nutanix, Inc. (NASDAQ:NTNX), worth close to $731.2 million, comprising 3% of its total 13F portfolio. The second most bullish fund manager is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $80.8 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism comprise David Zorub’s Parsifal Capital Management, Seymour Sy Kaufman and Michael Stark’s Crosslink Capital and Jerry Kochanski’s Shelter Haven Capital Management. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Nutanix, Inc. (NASDAQ:NTNX), around 17.56% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, setting aside 14.17 percent of its 13F equity portfolio to NTNX.

Judging by the fact that Nutanix, Inc. (NASDAQ:NTNX) has experienced bearish sentiment from the smart money, we can see that there exists a select few funds that decided to sell off their full holdings last quarter. Interestingly, D. E. Shaw’s D E Shaw said goodbye to the biggest position of all the hedgies followed by Insider Monkey, totaling an estimated $75.6 million in stock, and Gavin Baker’s Atreides Management was right behind this move, as the fund dumped about $48 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nutanix, Inc. (NASDAQ:NTNX) but similarly valued. We will take a look at Tetra Tech, Inc. (NASDAQ:TTEK), Arrow Electronics, Inc. (NYSE:ARW), Universal Display Corporation (NASDAQ:OLED), Scientific Games Corp (NASDAQ:SGMS), Jazz Pharmaceuticals Plc (NASDAQ:JAZZ), Ciena Corporation (NYSE:CIEN), and Zai Lab Limited (NASDAQ:ZLAB). This group of stocks’ market caps are similar to NTNX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $709 million. That figure was $1277 million in NTNX’s case. Zai Lab Limited (NASDAQ:ZLAB) is the most popular stock in this table. On the other hand Tetra Tech, Inc. (NASDAQ:TTEK) is the least popular one with only 16 bullish hedge fund positions. Nutanix, Inc. (NASDAQ:NTNX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NTNX is 55.5. 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 positive signal but 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately NTNX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NTNX were disappointed as the stock returned -11.9% since the end of September (through 12/9) 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 many of these stocks already outperformed the market since 2019.

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