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Did Hedge Funds Make The Right Call On Novo Nordisk A/S (NVO)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtNovo Nordisk A/S (NYSE:NVO) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Novo Nordisk A/S (NYSE:NVO) shareholders have witnessed an increase in hedge fund sentiment of late. NVO was in 24 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with NVO positions at the end of the previous quarter. Our calculations also showed that NVO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are many gauges stock market investors employ to appraise publicly traded companies. Some of the less utilized gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite investment managers can outperform the broader indices by a very impressive margin (see the details here).

Tom Gayner

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now let’s view the key hedge fund action regarding Novo Nordisk A/S (NYSE:NVO).

What have hedge funds been doing with Novo Nordisk A/S (NYSE:NVO)?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NVO over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Novo Nordisk A/S (NYSE:NVO), with a stake worth $1677.2 million reported as of the end of September. Trailing Renaissance Technologies was Fisher Asset Management, which amassed a stake valued at $922.6 million. Arrowstreet Capital, Markel Gayner Asset Management, and Sphera Global Healthcare Fund 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 Sphera Global Healthcare Fund allocated the biggest weight to Novo Nordisk A/S (NYSE:NVO), around 4.34% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, dishing out 3.22 percent of its 13F equity portfolio to NVO.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, initiated the biggest position in Novo Nordisk A/S (NYSE:NVO). Sphera Global Healthcare Fund had $34.7 million invested in the company at the end of the quarter. Krishen Sud’s Sivik Global Healthcare also initiated a $8.2 million position during the quarter. The other funds with brand new NVO positions are Alec Litowitz and Ross Laser’s Magnetar Capital, Greg Eisner’s Engineers Gate Manager, and Michael Gelband’s ExodusPoint Capital.

Let’s go over hedge fund activity in other stocks similar to Novo Nordisk A/S (NYSE:NVO). We will take a look at Abbott Laboratories (NYSE:ABT), Chevron Corporation (NYSE:CVX), Eli Lilly and Company (NYSE:LLY), and The Unilever Group (NYSE:UL). This group of stocks’ market valuations are similar to NVO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ABT 62 2189754 0
CVX 53 1646070 6
LLY 43 1323452 0
UL 13 207786 -4
Average 42.75 1341766 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.75 hedge funds with bullish positions and the average amount invested in these stocks was $1342 million. That figure was $3037 million in NVO’s case. Abbott Laboratories (NYSE:ABT) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UL) is the least popular one with only 13 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 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 gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately NVO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NVO investors were disappointed as the stock returned 8.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.