Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Novartis AG (NYSE:NVS) changed recently.
Is Novartis AG (NYSE:NVS) a buy, sell, or hold? The smart money was buying. The number of bullish hedge fund bets went up by 3 in recent months. Novartis AG (NYSE:NVS) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. 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 Q2 rankings). There were 19 hedge funds in our database with NVS positions at the end of the first quarter.
To the average investor there are several signals shareholders have at their disposal to analyze stocks. A pair of the most innovative signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite investment managers can trounce their index-focused peers by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Donald Sussman of Paloma Partners
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Do Hedge Funds Think NVS Is A Good Stock To Buy Now?
At second quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the first quarter of 2020. On the other hand, there were a total of 21 hedge funds with a bullish position in NVS 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the biggest position in Novartis AG (NYSE:NVS), worth close to $909 million, accounting for 0.6% of its total 13F portfolio. The second most bullish fund manager is ARK Investment Management, managed by Catherine D. Wood, which holds a $389.5 million position; 0.7% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish consist of Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Osterweis Capital Management allocated the biggest weight to Novartis AG (NYSE:NVS), around 1.29% of its 13F portfolio. ARK Investment Management is also relatively very bullish on the stock, dishing out 0.72 percent of its 13F equity portfolio to NVS.
As aggregate interest increased, key hedge funds have jumped into Novartis AG (NYSE:NVS) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in Novartis AG (NYSE:NVS). Two Sigma Advisors had $172.7 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $1 million position during the quarter. The following funds were also among the new NVS investors: Karim Abbadi and Edward McBride’s Centiva Capital and Donald Sussman’s Paloma Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Novartis AG (NYSE:NVS) but similarly valued. These stocks are PepsiCo, Inc. (NYSE:PEP), Chevron Corporation (NYSE:CVX), AbbVie Inc (NYSE:ABBV), Thermo Fisher Scientific Inc. (NYSE:TMO), Merck & Co., Inc. (NYSE:MRK), Broadcom Inc (NASDAQ:AVGO), and Novo Nordisk A/S (NYSE:NVO). All of these stocks’ market caps are similar to NVS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PEP | 66 | 5193638 | 5 |
| CVX | 50 | 4272637 | 9 |
| ABBV | 82 | 5351277 | 10 |
| TMO | 87 | 7391464 | 8 |
| MRK | 79 | 5296278 | 0 |
| AVGO | 47 | 3031104 | -6 |
| NVO | 20 | 3561818 | -3 |
| Average | 61.6 | 4871174 | 3.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 61.6 hedge funds with bullish positions and the average amount invested in these stocks was $4871 million. That figure was $1798 million in NVS’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 20 bullish hedge fund positions. Novartis AG (NYSE:NVS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NVS is 28.9. 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 negative signal and 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 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately NVS wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NVS investors were disappointed as the stock returned -8.3% since the end of June (through 11/5) 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 most of these stocks already outperformed the market in 2021.
Follow Novartis A G (NYSE:NVS)
Follow Novartis A G (NYSE:NVS)
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Disclosure: None. This article was originally published at Insider Monkey.
