Hedge Funds Aren’t Crazy About Novartis AG (ADR) (NVS) Anymore

We can judge whether Novartis AG (ADR) (NYSE:NVS) 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, research shows that these picks historically outperformed the market when we factor in known risk factors.

Novartis AG (ADR) (NYSE:NVS) investors should be aware of a decrease in hedge fund interest in recent months. Novartis AG (ADR) (NYSE:NVS) was in 29 hedge funds’ portfolios at the end of September. There were 35 hedge funds in our database with Novartis AG (ADR) (NYSE:NVS) positions at the end of the previous quarter. At the end of this article, we will also compare Novartis AG (ADR) (NYSE:NVS) to other stocks, including Wal-Mart Stores, Inc. (NYSE:WMT), AT&T Inc. (NYSE:T), and Procter & Gamble Co (NYSE:PG) to get a better sense of its popularity.

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In the financial world, there are a large number of metrics investors put to use to appraise stocks. A duo of the best metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the market by a superb amount (see the details here).

Keeping this in mind, let’s check out the new action surrounding Novartis AG (ADR) (NYSE:NVS).

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

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decrease of 17% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in Novartis AG (ADR) (NYSE:NVS). Fisher Asset Management has a $563.7 million position in the stock, comprising 1.2% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $154.6 million position; 0.4% of its 13F portfolio is allocated to the company. Other peers that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Osterweis’ Osterweis Capital Management, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.

Because Novartis AG (ADR) (NYSE:NVS) has experienced a falling interest from hedge fund managers, we can see that there lies a certain “tier” of funds who sold off their full holdings by the end of the third quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest investment of the 700 funds tracked by Insider Monkey, worth an estimated $4.9 million in stock. Vishal Saluja and Pham Quang’s fund, Endurant Capital Management, also cut its stock, about $4.2 million worth of shares. These transactions are important to note, as aggregate hedge fund interest was cut by 6 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Novartis AG (ADR) (NYSE:NVS) but similarly valued. We will take a look at Wal-Mart Stores, Inc. (NYSE:WMT), AT&T Inc. (NYSE:T), Procter & Gamble Co (NYSE:PG), and Pfizer Inc. (NYSE:PFE). This group of stocks’ market caps is similar to Novartis AG (ADR) (NYSE:NVS)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WMT 61 7088996 -4
T 60 3758951 11
PG 58 9063165 0
PFE 97 6090993 12

As you can see, these stocks had an average of 69 hedge funds with bullish positions and the average amount invested in these stocks was $6.50 billion. That figure was $1.01 billion in Novartis AG (ADR) (NYSE:NVS)’s case. Pfizer Inc. (NYSE:PFE) is the most popular stock in this table. On the other hand, Procter & Gamble Co (NYSE:PG) is the least popular one with only 58 bullish hedge fund positions. Compared to these stocks, Novartis AG (ADR) (NYSE:NVS) is even less popular than Procter & Gamble Co (NYSE:PG). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.