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Do Hedge Funds Love Novartis AG (NVS)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Novartis AG (NYSE:NVS).

Hedge fund interest in Novartis AG (NYSE:NVS) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Bank of America Corporation (NYSE:BAC), Pfizer Inc. (NYSE:PFE), and The Walt Disney Company (NYSE:DIS) to gather more data points. Our calculations also showed that NVS 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 today’s marketplace there are several metrics stock traders have at their disposal to analyze stocks. A couple of the less utilized metrics are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outpace the S&P 500 by a healthy margin (see the details here).

MOORE GLOBAL INVESTMENTS

Louis Bacon Moore of Moore Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this oneWe interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the recent hedge fund action regarding Novartis AG (NYSE:NVS).

What does smart money think about Novartis AG (NYSE:NVS)?

At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in NVS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in Novartis AG (NYSE:NVS), which was worth $703.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $700.1 million worth of shares. Arrowstreet Capital, Millennium Management, and Redmile Group 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 Integral Health Asset Management allocated the biggest weight to Novartis AG (NYSE:NVS), around 2.54% of its 13F portfolio. Bourgeon Capital is also relatively very bullish on the stock, earmarking 2.4 percent of its 13F equity portfolio to NVS.

Since Novartis AG (NYSE:NVS) has experienced falling interest from the smart money, it’s safe to say that there was a specific group of hedgies that elected to cut their full holdings by the end of the first quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, worth close to $60 million in stock. Christopher James’s fund, Partner Fund Management, also sold off its stock, about $40.7 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Novartis AG (NYSE:NVS) but similarly valued. We will take a look at Bank of America Corporation (NYSE:BAC), Pfizer Inc. (NYSE:PFE), The Walt Disney Company (NYSE:DIS), and Toyota Motor Corporation (NYSE:TM). This group of stocks’ market values resemble NVS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BAC 95 21721713 -4
PFE 67 3159878 5
DIS 102 4701800 -16
TM 11 206410 -1
Average 68.75 7447450 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 68.75 hedge funds with bullish positions and the average amount invested in these stocks was $7447 million. That figure was $2035 million in NVS’s case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 11 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. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately NVS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NVS investors were disappointed as the stock returned 6% 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.