Is NVS Stock A Buy or Sell?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Novartis AG (NYSE:NVS) in this article.

Is NVS stock a buy? The best stock pickers were selling. The number of long hedge fund positions were cut by 2 recently. Novartis AG (NYSE:NVS) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 34. Our calculations also showed that NVS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 25 hedge funds in our database with NVS holdings at the end of September.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a glance at the key hedge fund action regarding Novartis AG (NYSE:NVS).

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

At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in NVS a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the biggest position in Novartis AG (NYSE:NVS), worth close to $881.8 million, comprising 0.7% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $449.3 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism encompass Catherine D. Wood’s ARK Investment Management, Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Sphera Global Healthcare Fund allocated the biggest weight to Novartis AG (NYSE:NVS), around 3.6% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, setting aside 1.6 percent of its 13F equity portfolio to NVS.

Because Novartis AG (NYSE:NVS) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few money managers that decided to sell off their full holdings in the fourth quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management cut the largest investment of the 750 funds monitored by Insider Monkey, totaling close to $69.1 million in stock. D. E. Shaw’s fund, D E Shaw, also sold off its stock, about $3.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to Novartis AG (NYSE:NVS). These stocks are Merck & Co., Inc. (NYSE:MRK), ASML Holding N.V. (NASDAQ:ASML), PepsiCo, Inc. (NASDAQ:PEP), AT&T Inc. (NYSE:T), Pfizer Inc. (NYSE:PFE), salesforce.com, inc. (NYSE:CRM), and Intel Corporation (NASDAQ:INTC). This group of stocks’ market valuations are closest to NVS’s market valuation.

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As you can see these stocks had an average of 65.4 hedge funds with bullish positions and the average amount invested in these stocks was $4783 million. That figure was $1680 million in NVS’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Novartis AG (NYSE:NVS) is even less popular than ASML. Our overall hedge fund sentiment score for NVS is 23.3. 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. Hedge funds dodged a bullet by taking a bearish stance towards NVS. Our calculations showed that the top 30 most popular hedge fund stocks returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th but managed to beat the market again by 0.9 percentage points. Unfortunately NVS wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was very bearish); NVS investors were disappointed as the stock returned -2.7% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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