Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of NVIDIA Corporation (NASDAQ:NVDA) and see how the stock is affected by the recent hedge fund activity.
NVIDIA Corporation (NASDAQ:NVDA) has seen an increase in hedge fund sentiment recently. 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 FirstEnergy Corp. (NYSE:FE), Workday Inc (NYSE:WDAY), and Red Hat, Inc. (NYSE:RHT) to gather more data points.
In the eyes of most investors, hedge funds are viewed as worthless, old financial vehicles of years past. While there are more than 8000 funds trading at the moment, Our researchers choose to focus on the masters of this club, approximately 700 funds. These money managers shepherd the majority of the hedge fund industry’s total capital, and by tracking their matchless investments, Insider Monkey has unsheathed numerous investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Now, we’re going to go over the recent action regarding NVIDIA Corporation (NASDAQ:NVDA).
How have hedgies been trading NVIDIA Corporation (NASDAQ:NVDA)?
At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Winton Capital Management, managed by David Harding, holds the biggest position in NVIDIA Corporation (NASDAQ:NVDA). Winton Capital Management has a $82.9 million position in the stock, comprising 0.7% of its 13F portfolio. Sitting at the No. 2 spot is Israel Englander of Millennium Management, with a $49.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of Martin Whitman’s Third Avenue Management, Mike Masters’s Masters Capital Management and Cliff Asness’ AQR Capital Management.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, initiated the largest position in NVIDIA Corporation (NASDAQ:NVDA). Millennium Management had $49.2 million invested in the company at the end of the quarter. Alex Sacerdote’s Whale Rock Capital Management also initiated a $17.9 million position during the quarter. The following funds were also among the new NVDA investors: Daniel S. Och’s OZ Management, Columbus Circle Investors, and Daniel S. Och’s OZ Management.
Let’s now review hedge fund activity in other stocks similar to NVIDIA Corporation (NASDAQ:NVDA). These stocks are FirstEnergy Corp. (NYSE:FE), Workday Inc (NYSE:WDAY), Red Hat, Inc. (NYSE:RHT), and Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH). This group of stocks’ market values resemble NVDA’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $719 million. That figure was $456 million in NVDA’s case. Red Hat, Inc. (NYSE:RHT) is the most popular stock in this table. On the other hand FirstEnergy Corp. (NYSE:FE) is the least popular one with only 24 bullish hedge fund positions. NVIDIA Corporation (NASDAQ:NVDA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RHT might be a better candidate to consider a long position.