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Hedge Funds Are Done Buying NovoCure Limited (NVCR)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought NovoCure Limited (NASDAQ:NVCR) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in NovoCure Limited (NASDAQ:NVCR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NVCR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). 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 Enphase Energy Inc (NASDAQ:ENPH), Tandem Diabetes Care Inc (NASDAQ:TNDM), and Allogene Therapeutics, Inc. (NASDAQ:ALLO) to gather more data points. Our calculations also showed that NVCR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 21st century investor’s toolkit there are many indicators shareholders employ to grade publicly traded companies. A couple of the most innovative indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top investment managers can outpace the market by a significant margin (see the details here).

Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s check out the recent hedge fund action surrounding NovoCure Limited (NASDAQ:NVCR).

How are hedge funds trading NovoCure Limited (NASDAQ:NVCR)?

At second quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in NVCR over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of NovoCure Limited (NASDAQ:NVCR), with a stake worth $118.6 million reported as of the end of September. Trailing Renaissance Technologies was Darsana Capital Partners, which amassed a stake valued at $100.8 million. Two Sigma Advisors, Rhenman & Partners Asset Management, and Balyasny Asset Management 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 Darsana Capital Partners allocated the biggest weight to NovoCure Limited (NASDAQ:NVCR), around 5.98% of its 13F portfolio. Rhenman & Partners Asset Management is also relatively very bullish on the stock, earmarking 2.4 percent of its 13F equity portfolio to NVCR.

Judging by the fact that NovoCure Limited (NASDAQ:NVCR) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies that decided to sell off their entire stakes in the second quarter. It’s worth mentioning that Peter Kolchinsky’s RA Capital Management sold off the largest position of the 750 funds monitored by Insider Monkey, comprising close to $17.4 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also dropped its stock, about $1.9 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as NovoCure Limited (NASDAQ:NVCR) but similarly valued. We will take a look at Enphase Energy Inc (NASDAQ:ENPH), Tandem Diabetes Care Inc (NASDAQ:TNDM), Allogene Therapeutics, Inc. (NASDAQ:ALLO), Globant SA (NYSE:GLOB), Huaneng Power International Inc (NYSE:HNP), AMERCO (NASDAQ:UHAL), and B2Gold Corp (NYSE:BTG). This group of stocks’ market values are closest to NVCR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENPH 40 716678 5
TNDM 32 401577 4
ALLO 24 329892 12
GLOB 17 235992 0
HNP 2 2391 -1
UHAL 20 327924 5
BTG 18 500334 -1
Average 21.9 359255 3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $359 million. That figure was $384 million in NVCR’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 2 bullish hedge fund positions. NovoCure Limited (NASDAQ:NVCR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NVCR is 67.9. 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 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on NVCR as the stock returned 80.3% during Q3 (through September 25th) 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.