Is NKLA A Good Stock To Buy According To Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Nikola Corporation (NASDAQ:NKLA) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is NKLA a good stock to buy? The best stock pickers were taking a bearish view. The number of bullish hedge fund bets went down by 12 in recent months. Nikola Corporation (NASDAQ:NKLA) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 29. Our calculations also showed that NKLA isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 today’s marketplace there are a multitude of gauges investors put to use to value publicly traded companies. A duo of the most useful gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the broader indices by a very impressive margin (see the details here).

Andreas Halvorsen

Andreas Halvorsen of Viking Global

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now let’s take a gander at the key hedge fund action encompassing Nikola Corporation (NASDAQ:NKLA).

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

Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -41% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NKLA over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Nikola Corporation (NASDAQ:NKLA) was held by Coatue Management, which reported holding $75.7 million worth of stock at the end of September. It was followed by Viking Global with a $37 million position. Other investors bullish on the company included Citadel Investment Group, Suvretta Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Antipodean Advisors allocated the biggest weight to Nikola Corporation (NASDAQ:NKLA), around 0.46% of its 13F portfolio. Coatue Management is also relatively very bullish on the stock, setting aside 0.4 percent of its 13F equity portfolio to NKLA.

Since Nikola Corporation (NASDAQ:NKLA) has faced a decline in interest from the smart money, logic holds that there exists a select few fund managers that slashed their entire stakes last quarter. At the top of the heap, Jeffrey Ubben’s ValueAct Capital said goodbye to the biggest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $788.4 million in stock, and Scott Bessent’s Key Square Capital Management was right behind this move, as the fund said goodbye to about $135.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 12 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Nikola Corporation (NASDAQ:NKLA). These stocks are Floor & Decor Holdings, Inc. (NYSE:FND), Repligen Corporation (NASDAQ:RGEN), Wynn Resorts, Limited (NASDAQ:WYNN), Mobile TeleSystems Public Joint Stock Company (NYSE:MBT), XPO Logistics Inc (NYSE:XPO), AGNC Investment Corp. (NASDAQ:AGNC), and Iron Mountain Incorporated (NYSE:IRM). All of these stocks’ market caps are similar to NKLA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FND 42 942350 -2
RGEN 35 982491 1
WYNN 43 510257 -2
MBT 10 311140 -1
XPO 39 2338039 -1
AGNC 32 382410 -5
IRM 25 112125 3
Average 32.3 796973 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.3 hedge funds with bullish positions and the average amount invested in these stocks was $797 million. That figure was $200 million in NKLA’s case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand Mobile TeleSystems Public Joint Stock Company (NYSE:MBT) is the least popular one with only 10 bullish hedge fund positions. Nikola Corporation (NASDAQ:NKLA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NKLA is 21.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately NKLA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NKLA investors were disappointed as the stock returned -19.9% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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