Is Nuance Communications (NUAN) Stock A Buy or Sell?

With the fourth-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 first quarter of 2021. One of these stocks was Nuance Communications Inc. (NASDAQ:NUAN).

Is NUAN stock a buy or sell? Nuance Communications Inc. (NASDAQ:NUAN) has experienced an increase in enthusiasm from smart money lately. Nuance Communications Inc. (NASDAQ:NUAN) was in 60 hedge funds’ portfolios at the end of December. The all time high for this statistic is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 45 hedge funds in our database with NUAN positions at the end of the third quarter. Our calculations also showed that NUAN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Howard Marks of Oaktree Capital Management

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

At Q4’s end, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NUAN over the last 22 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 NUAN A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Coatue Management, managed by Philippe Laffont, holds the largest position in Nuance Communications Inc. (NASDAQ:NUAN). Coatue Management has a $732.6 million position in the stock, comprising 2.7% of its 13F portfolio. Sitting at the No. 2 spot is Viking Global, managed by Andreas Halvorsen, which holds a $722.3 million position; 2% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Gabriel Plotkin’s Melvin Capital Management,  Lone Pine Capital and Ricky Sandler’s Eminence Capital. In terms of the portfolio weights assigned to each position Andar Capital allocated the biggest weight to Nuance Communications Inc. (NASDAQ:NUAN), around 9.15% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, earmarking 7.35 percent of its 13F equity portfolio to NUAN.

Now, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most outsized position in Nuance Communications Inc. (NASDAQ:NUAN). Millennium Management had $85.3 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $79.5 million position during the quarter. The other funds with brand new NUAN positions are Ben Jacobs’s Anomaly Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Wen Han Li’s Andar Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Nuance Communications Inc. (NASDAQ:NUAN) but similarly valued. These stocks are Enel Americas S.A. (NYSE:ENIA), ASE Technology Holding Co., Ltd. (NYSE:ASX), Charles River Laboratories International Inc. (NYSE:CRL), ContextLogic Inc. (NASDAQ:WISH), Open Text Corporation (NASDAQ:OTEX), W.P. Carey Inc. (NYSE:WPC), and Howmet Aerospace Inc. (NYSE:HWM). This group of stocks’ market caps are closest to NUAN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENIA 9 91500 -2
ASX 9 183415 -2
CRL 43 1187297 7
WISH 24 348110 23
OTEX 18 234136 -1
WPC 18 197829 -5
HWM 49 4092342 14
Average 24.3 904947 4.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $905 million. That figure was $4678 million in NUAN’s case. Howmet Aerospace Inc. (NYSE:HWM) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Nuance Communications Inc. (NASDAQ:NUAN) is more popular among hedge funds. Our overall hedge fund sentiment score for NUAN is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately NUAN wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on NUAN were disappointed as the stock returned 2.1% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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