In this article we will analyze whether NortonLifeLock Inc. (NASDAQ:NLOK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
NortonLifeLock Inc. (NASDAQ:NLOK) was in 32 hedge funds’ portfolios at the end of March. The all time high for this statistic is 46. NLOK has experienced an increase in hedge fund sentiment in recent months. There were 29 hedge funds in our database with NLOK holdings at the end of December. Our calculations also showed that NLOK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
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. With all of this in mind we’re going to view the fresh hedge fund action surrounding NortonLifeLock Inc. (NASDAQ:NLOK).
Do Hedge Funds Think NLOK Is A Good Stock To Buy Now?
At the end of March, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NLOK over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Starboard Value LP, managed by Jeffrey Smith, holds the most valuable position in NortonLifeLock Inc. (NASDAQ:NLOK). Starboard Value LP has a $448.7 million position in the stock, comprising 9.6% of its 13F portfolio. The second largest stake is held by Iridian Asset Management, managed by David Cohen and Harold Levy, which holds a $140.3 million position; 2.4% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions include Peter S. Park’s Park West Asset Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Michael Bilger’s 59 North Capital. In terms of the portfolio weights assigned to each position 59 North Capital allocated the biggest weight to NortonLifeLock Inc. (NASDAQ:NLOK), around 16.36% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, dishing out 10.27 percent of its 13F equity portfolio to NLOK.
Consequently, some big names were leading the bulls’ herd. Iridian Asset Management, managed by David Cohen and Harold Levy, established the most outsized position in NortonLifeLock Inc. (NASDAQ:NLOK). Iridian Asset Management had $140.3 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $27.1 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks similar to NortonLifeLock Inc. (NASDAQ:NLOK). These stocks are Ceridian HCM Holding Inc. (NYSE:CDAY), Medical Properties Trust, Inc. (NYSE:MPW), Texas Pacific Land Corporation (NYSE:TPL), Sunrun Inc (NASDAQ:RUN), Canopy Growth Corporation (NASDAQ:CGC), Opendoor Technologies Inc. (NASDAQ:OPEN), and Quanta Services Inc (NYSE:PWR). This group of stocks’ market valuations are similar to NLOK’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $1205 million. That figure was $1028 million in NLOK’s case. Sunrun Inc (NASDAQ:RUN) is the most popular stock in this table. On the other hand Canopy Growth Corporation (NASDAQ:CGC) is the least popular one with only 12 bullish hedge fund positions. NortonLifeLock Inc. (NASDAQ:NLOK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NLOK is 63.4. 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 gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on NLOK as the stock returned 28.5% since the end of Q1 (through 7/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.