Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is ServiceNow Inc (NYSE:NOW), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
ServiceNow Inc (NYSE:NOW) was in 91 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 98. NOW investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. There were 98 hedge funds in our database with NOW holdings at the end of March. Our calculations also showed that NOW ranked 24th among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Andreas Halvorsen of Viking Global
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s go over the key hedge fund action regarding ServiceNow Inc (NYSE:NOW).
Do Hedge Funds Think NOW Is A Good Stock To Buy Now?
At the end of June, a total of 91 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NOW over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in ServiceNow Inc (NYSE:NOW) was held by Lone Pine Capital, which reported holding $1356.7 million worth of stock at the end of June. It was followed by Tiger Global Management LLC with a $1212.4 million position. Other investors bullish on the company included Viking Global, SCGE Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Praesidium Investment Management Company allocated the biggest weight to ServiceNow Inc (NYSE:NOW), around 9.96% of its 13F portfolio. Aravt Global is also relatively very bullish on the stock, dishing out 8.07 percent of its 13F equity portfolio to NOW.
Because ServiceNow Inc (NYSE:NOW) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there were a few money managers that slashed their full holdings in the second quarter. Interestingly, Josh Resnick’s Jericho Capital Asset Management said goodbye to the largest investment of the 750 funds watched by Insider Monkey, worth close to $109.1 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $55.2 million worth. These transactions are important to note, as total hedge fund interest fell by 7 funds in the second quarter.
Let’s go over hedge fund activity in other stocks similar to ServiceNow Inc (NYSE:NOW). These stocks are Snap Inc. (NYSE:SNAP), Lockheed Martin Corporation (NYSE:LMT), GlaxoSmithKline plc (NYSE:GSK), S&P Global Inc. (NYSE:SPGI), Stryker Corporation (NYSE:SYK), Micron Technology, Inc. (NASDAQ:MU), and Moderna, Inc. (NASDAQ:MRNA). This group of stocks’ market caps match NOW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNAP | 64 | 5399955 | -9 |
| LMT | 58 | 1565723 | 8 |
| GSK | 28 | 1466364 | 3 |
| SPGI | 71 | 7278360 | 5 |
| SYK | 48 | 3369193 | 2 |
| MU | 87 | 6333058 | -13 |
| MRNA | 37 | 5754554 | -2 |
| Average | 56.1 | 4452458 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 56.1 hedge funds with bullish positions and the average amount invested in these stocks was $4452 million. That figure was $7011 million in NOW’s case. Micron Technology, Inc. (NASDAQ:MU) is the most popular stock in this table. On the other hand GlaxoSmithKline plc (NYSE:GSK) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks ServiceNow Inc (NYSE:NOW) is more popular among hedge funds. Our overall hedge fund sentiment score for NOW is 75.9. 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. 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 returned 24.1% in 2021 through September 20th but still managed to beat the market by 6.9 percentage points. Hedge funds were also right about betting on NOW as the stock returned 18% since the end of June (through 9/20) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
