Is Novo Nordisk A/S (NVO) A Good Stock To Buy?

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Novo Nordisk A/S (NYSE:NVO).

Is NVO a good stock to buy? The smart money was turning less bullish. The number of bullish hedge fund bets were cut by 3 in recent months. Novo Nordisk A/S (NYSE:NVO) was in 20 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 25. Our calculations also showed that NVO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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 scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a peek at the key hedge fund action regarding Novo Nordisk A/S (NYSE:NVO).

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

At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NVO over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Novo Nordisk A/S (NYSE:NVO), which was worth $2025.6 million at the end of the second quarter. On the second spot was Fisher Asset Management which amassed $1347.2 million worth of shares. Markel Gayner Asset Management, Citadel Investment Group, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Novo Nordisk A/S (NYSE:NVO), around 2.53% of its 13F portfolio. Markel Gayner Asset Management is also relatively very bullish on the stock, earmarking 1.15 percent of its 13F equity portfolio to NVO.

Due to the fact that Novo Nordisk A/S (NYSE:NVO) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedgies that decided to sell off their full holdings by the end of the second quarter. At the top of the heap, Michael Gelband’s ExodusPoint Capital dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $1.3 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also cut its stock, about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks similar to Novo Nordisk A/S (NYSE:NVO). These stocks are Danaher Corporation (NYSE:DHR), Wells Fargo & Company (NYSE:WFC), Accenture Plc (NYSE:ACN), BHP Group (NYSE:BHP), Shopify Inc (NYSE:SHOP), United Parcel Service, Inc. (NYSE:UPS), and T-Mobile US, Inc. (NYSE:TMUS). All of these stocks’ market caps resemble NVO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 68.4 hedge funds with bullish positions and the average amount invested in these stocks was $5942 million. That figure was $3562 million in NVO’s case. T-Mobile US, Inc. (NYSE:TMUS) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 18 bullish hedge fund positions. Novo Nordisk A/S (NYSE:NVO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NVO is 27.2. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on NVO as the stock returned 27.2% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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

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