We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was ServiceNow Inc (NYSE:NOW).
ServiceNow Inc (NYSE:NOW) was in 75 hedge funds’ portfolios at the end of December. NOW has experienced a decrease in hedge fund interest of late. There were 92 hedge funds in our database with NOW holdings at the end of the previous quarter. Our calculations also showed that NOW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the 21st century investor’s toolkit there are plenty of formulas investors have at their disposal to analyze stocks. Some of the most innovative formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can beat the S&P 500 by a superb margin (see the details here).
Gabriel Plotkin of Melvin Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations We are probably at the peak of the COVID-19 pandemic, so we check out this biotech investor’s coronavirus picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the latest hedge fund action regarding ServiceNow Inc (NYSE:NOW).
How have hedgies been trading ServiceNow Inc (NYSE:NOW)?
Heading into the first quarter of 2020, a total of 75 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the third quarter of 2019. On the other hand, there were a total of 61 hedge funds with a bullish position in NOW a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Viking Global held the most valuable stake in ServiceNow Inc (NYSE:NOW), which was worth $777.4 million at the end of the third quarter. On the second spot was Coatue Management which amassed $772.6 million worth of shares. Lone Pine Capital, Melvin Capital Management, and D1 Capital Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Praesidium Investment Management Company allocated the biggest weight to ServiceNow Inc (NYSE:NOW), around 11.72% of its 13F portfolio. North Peak Capital is also relatively very bullish on the stock, dishing out 11.41 percent of its 13F equity portfolio to NOW.
Judging by the fact that ServiceNow Inc (NYSE:NOW) has faced bearish sentiment from hedge fund managers, we can see that there was a specific group of fund managers who sold off their entire stakes by the end of the third quarter. At the top of the heap, Panayotis Takis Sparaggis’s Alkeon Capital Management cut the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $317.3 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dumped its stock, about $213.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 17 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to ServiceNow Inc (NYSE:NOW). These stocks are General Motors Company (NYSE:GM), Las Vegas Sands Corp. (NYSE:LVS), America Movil SAB de CV (NYSE:AMX), and Walgreens Boots Alliance Inc (NASDAQ:WBA). This group of stocks’ market caps are closest to NOW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GM | 75 | 6531524 | -1 |
| LVS | 37 | 1256467 | -5 |
| AMX | 17 | 278371 | 6 |
| WBA | 38 | 693507 | 0 |
| Average | 41.75 | 2189967 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.75 hedge funds with bullish positions and the average amount invested in these stocks was $2190 million. That figure was $5035 million in NOW’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 17 bullish hedge fund positions. ServiceNow Inc (NYSE:NOW) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 1.0% in 2020 through April 20th but still beat the market by 11 percentage points. Hedge funds were also right about betting on NOW as the stock returned 7.1% in 2020 (through April 20th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
