In this article we will check out the progression of hedge fund sentiment towards Novavax, Inc. (NASDAQ:NVAX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Novavax, Inc. (NASDAQ:NVAX) has experienced an increase in hedge fund interest recently. NVAX was in 4 hedge funds’ portfolios at the end of the first quarter of 2020. There were 3 hedge funds in our database with NVAX holdings at the end of the previous quarter. Our calculations also showed that NVAX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the fresh hedge fund action regarding Novavax, Inc. (NASDAQ:NVAX).
What have hedge funds been doing with Novavax, Inc. (NASDAQ:NVAX)?
Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NVAX over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the biggest position in Novavax, Inc. (NASDAQ:NVAX), worth close to $8.6 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $2.6 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of D. E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and Mike Vranos’s Ellington. In terms of the portfolio weights assigned to each position Ellington allocated the biggest weight to Novavax, Inc. (NASDAQ:NVAX), around 0.05% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to NVAX.
Now, key money managers have jumped into Novavax, Inc. (NASDAQ:NVAX) headfirst. Citadel Investment Group, managed by Ken Griffin, created the most valuable position in Novavax, Inc. (NASDAQ:NVAX). Citadel Investment Group had $0.4 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also made a $0.2 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks similar to Novavax, Inc. (NASDAQ:NVAX). We will take a look at INTL Fcstone Inc (NASDAQ:INTL), BRP Inc. (NASDAQ:DOOO), Trinseo S.A. (NYSE:TSE), and Delphi Technologies PLC (NYSE:DLPH). This group of stocks’ market values resemble NVAX’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $11 million in NVAX’s case. Delphi Technologies PLC (NYSE:DLPH) is the most popular stock in this table. On the other hand INTL Fcstone Inc (NASDAQ:INTL) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Novavax, Inc. (NASDAQ:NVAX) is even less popular than INTL. Hedge funds clearly dropped the ball on NVAX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on NVAX as the stock returned 239% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.