Novartis AG (ADR) (NVS): Are Hedge Funds Right About This Stock?

Novartis AG (ADR) (NYSE:NVS) was in 24 hedge funds’ portfolio at the end of March. NVS investors should be aware of an increase in support from the world’s most elite money managers lately. There were 19 hedge funds in our database with NVS holdings at the end of the previous quarter.

According to most shareholders, hedge funds are viewed as unimportant, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open today, we look at the leaders of this group, about 450 funds. It is widely believed that this group has its hands on most of all hedge funds’ total asset base, and by watching their top picks, we have identified a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as important, optimistic insider trading sentiment is another way to parse down the investments you’re interested in. As the old adage goes: there are plenty of reasons for a corporate insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this tactic if you understand where to look (learn more here).

Now, we’re going to take a glance at the latest action regarding Novartis AG (ADR) (NYSE:NVS).

Hedge fund activity in Novartis AG (ADR) (NYSE:NVS)

Heading into Q2, a total of 24 of the hedge funds we track were long in this stock, a change of 26% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially.

Of the funds we track, Ken Fisher’s Fisher Asset Management had the most valuable position in Novartis AG (ADR) (NYSE:NVS), worth close to $375.3 million, accounting for 1% of its total 13F portfolio. Coming in second is Osterweis Capital Management, managed by John Osterweis, which held a $47.4 million position; 1.8% of its 13F portfolio is allocated to the stock. Remaining hedge funds that are bullish include Lee Ainslie’s Maverick Capital, Dmitry Balyasny’s Balyasny Asset Management and Joseph Edelman’s Perceptive Advisors.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Maverick Capital, managed by Lee Ainslie, created the most valuable position in Novartis AG (ADR) (NYSE:NVS). Maverick Capital had 37.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $3.5 million investment in the stock during the quarter. The other funds with brand new NVS positions are Jacob Gottlieb’s Visium Asset Management, Israel Englander’s Millennium Management, and Matthew Tewksbury’s Stevens Capital Management.

What do corporate executives and insiders think about Novartis AG (ADR) (NYSE:NVS)?

Insider buying is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the last 180-day time frame, Novartis AG (ADR) (NYSE:NVS) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Novartis AG (ADR) (NYSE:NVS). These stocks are GlaxoSmithKline plc (ADR) (NYSE:GSK), Merck & Co., Inc. (NYSE:MRK), Sanofi SA (ADR) (NYSE:SNY), Johnson & Johnson (NYSE:JNJ), and Pfizer Inc. (NYSE:PFE). This group of stocks belong to the drug manufacturers – major industry and their market caps are closest to NVS’s market cap.

With the results demonstrated by the aforementioned strategies, everyday investors should always watch hedge fund and insider trading activity, and Novartis AG (ADR) (NYSE:NVS) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds