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How Did NVIDIA Corporation (NVDA) Perform In Comparison to Hedge Fund Favorites in 2019?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 31% in 2019 (through December 23rd). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like NVIDIA Corporation (NASDAQ:NVDA).

Is NVIDIA Corporation (NASDAQ:NVDA) the right pick for your portfolio? Hedge funds are getting more optimistic. The number of long hedge fund positions inched up by 3 lately. Our calculations also showed that NVDA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). NVDA was in 48 hedge funds’ portfolios at the end of the third quarter of 2019. There were 45 hedge funds in our database with NVDA holdings at the end of the previous quarter.

Today there are plenty of formulas stock market investors use to size up stocks. A duo of the less known formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best fund managers can trounce the broader indices by a healthy amount (see the details here).

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to view the fresh hedge fund action regarding NVIDIA Corporation (NASDAQ:NVDA).

How are hedge funds trading NVIDIA Corporation (NASDAQ:NVDA)?

At Q3’s end, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NVDA over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NVDA A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David E. Shaw’s D E Shaw has the most valuable position in NVIDIA Corporation (NASDAQ:NVDA), worth close to $469.5 million, accounting for 0.6% of its total 13F portfolio. The second most bullish fund manager is Fisher Asset Management, led by Ken Fisher, holding a $176.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish contain Renaissance Technologies, and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Keywise Capital Management allocated the biggest weight to NVIDIA Corporation (NASDAQ:NVDA), around 13.69% of its 13F portfolio. Ratan Capital Group is also relatively very bullish on the stock, setting aside 6.58 percent of its 13F equity portfolio to NVDA.

As one would reasonably expect, key hedge funds were breaking ground themselves. Moore Global Investments, managed by Louis Bacon, assembled the largest position in NVIDIA Corporation (NASDAQ:NVDA). Moore Global Investments had $10.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $6.6 million position during the quarter. The other funds with brand new NVDA positions are Ray Dalio’s Bridgewater Associates, Ed Bosek’s BeaconLight Capital, and Minhua Zhang’s Weld Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NVIDIA Corporation (NASDAQ:NVDA) but similarly valued. These stocks are Starbucks Corporation (NASDAQ:SBUX), Linde plc (NYSE:LIN), ASML Holding N.V. (NASDAQ:ASML), and Danaher Corporation (NYSE:DHR). This group of stocks’ market caps are closest to NVDA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SBUX 52 5593793 3
LIN 44 2523402 3
ASML 15 774677 3
DHR 57 2732120 -1
Average 42 2905998 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $2906 million. That figure was $1473 million in NVDA’s case. Danaher Corporation (NYSE:DHR) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 15 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on NVDA as the stock returned 79.6% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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