It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Novo Nordisk A/S (NYSE:NVO) during the quarter below.
Is Novo Nordisk A/S (NYSE:NVO) worth your attention right now? The best stock pickers are in a bullish mood. The number of bullish hedge fund bets advanced by 1 in recent months. Our calculations also showed that NVO isn’t among the 30 most popular stocks among hedge funds. NVO was in 18 hedge funds’ portfolios at the end of December. There were 17 hedge funds in our database with NVO holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to check out the new hedge fund action surrounding Novo Nordisk A/S (NYSE:NVO).
How are hedge funds trading Novo Nordisk A/S (NYSE:NVO)?
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2018. On the other hand, there were a total of 18 hedge funds with a bullish position in NVO a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Novo Nordisk A/S (NYSE:NVO), which was worth $955.7 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $654.3 million worth of shares. Moreover, Arrowstreet Capital, Markel Gayner Asset Management, and Point72 Asset Management were also bullish on Novo Nordisk A/S (NYSE:NVO), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, specific money managers have jumped into Novo Nordisk A/S (NYSE:NVO) headfirst. Point72 Asset Management, managed by Steve Cohen, created the biggest position in Novo Nordisk A/S (NYSE:NVO). Point72 Asset Management had $41.1 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $9.1 million position during the quarter. The following funds were also among the new NVO investors: Michael Castor’s Sio Capital and Minhua Zhang’s Weld Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Novo Nordisk A/S (NYSE:NVO) but similarly valued. We will take a look at Sanofi (NASDAQ:SNY), BHP Group (NYSE:BBL), salesforce.com, inc. (NYSE:CRM), and Philip Morris International Inc. (NYSE:PM). All of these stocks’ market caps resemble NVO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNY | 23 | 847479 | -1 |
| BBL | 15 | 713874 | -1 |
| CRM | 99 | 5077847 | 13 |
| PM | 48 | 3023229 | 7 |
| Average | 46.25 | 2415607 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.25 hedge funds with bullish positions and the average amount invested in these stocks was $2416 million. That figure was $2150 million in NVO’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand BHP Group (NYSE:BBL) is the least popular one with only 15 bullish hedge fund positions. Novo Nordisk A/S (NYSE:NVO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately NVO wasn’t in this group. Hedge funds that bet on NVO were disappointed as the stock returned 10.5% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
