Hedge Fund Sentiment Is Stagnant On Novartis AG (NVS)

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30th, so let’s proceed with the discussion of the hedge fund sentiment on Novartis AG (NYSE:NVS).

Novartis AG (NYSE:NVS) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that NVS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare NVS to other stocks including McDonald’s Corporation (NYSE:MCD), Morgan Stanley (NYSE:MS), and Texas Instruments Incorporated (NASDAQ:TXN) to get a better sense of its popularity.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let’s view the recent hedge fund action encompassing Novartis AG (NYSE:NVS).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

Do Hedge Funds Think NVS Is A Good Stock To Buy Now?

At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NVS over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Novartis AG (NYSE:NVS) was held by Fisher Asset Management, which reported holding $842.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $270.5 million position. Other investors bullish on the company included Two Sigma Advisors, Camber Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Camber Capital Management allocated the biggest weight to Novartis AG (NYSE:NVS), around 5.04% of its 13F portfolio. Fisher Asset Management is also relatively very bullish on the stock, dishing out 0.52 percent of its 13F equity portfolio to NVS.

Due to the fact that Novartis AG (NYSE:NVS) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few money managers who were dropping their positions entirely last quarter. Interestingly, Catherine D. Wood’s ARK Investment Management sold off the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $389.5 million in stock. Matthew Stadelman’s fund, Diamond Hill Capital, also dropped its stock, about $0.8 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Novartis AG (NYSE:NVS). These stocks are McDonald’s Corporation (NYSE:MCD), Morgan Stanley (NYSE:MS), Texas Instruments Incorporated (NASDAQ:TXN), Sea Limited (NYSE:SE), Shopify Inc (NYSE:SHOP), Medtronic plc (NYSE:MDT), and T-Mobile US, Inc. (NASDAQ:TMUS). This group of stocks’ market valuations are closest to NVS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCD 58 3339098 -8
MS 65 4990950 -4
TXN 40 1938965 -10
SE 117 14135309 13
SHOP 73 11451372 -12
MDT 62 2278950 -6
TMUS 89 6928776 -11
Average 72 6437631 -5.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 72 hedge funds with bullish positions and the average amount invested in these stocks was $6438 million. That figure was $1440 million in NVS’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand Texas Instruments Incorporated (NASDAQ:TXN) is the least popular one with only 40 bullish hedge fund positions. Compared to these stocks Novartis AG (NYSE:NVS) is even less popular than TXN. Our overall hedge fund sentiment score for NVS is 24.4. 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. Hedge funds dodged a bullet by taking a bearish stance towards NVS. Our calculations showed that the top 5 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 but managed to beat the market again by 3.6 percentage points. Unfortunately NVS wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); NVS investors were disappointed as the stock returned 7% since the end of the third quarter (through 12/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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