At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards NVIDIA Corporation (NASDAQ:NVDA).
Is NVIDIA Corporation (NASDAQ:NVDA) a good stock to buy now? NVDA shareholders have witnessed a decrease in hedge fund sentiment recently. NVIDIA Corporation (NASDAQ:NVDA) was in 82 hedge funds’ portfolios at the end of September. The all time high for this statistics is 95. 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 for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are assumed to be unimportant, old financial vehicles of years past. While there are over 8000 funds trading today, We look at the bigwigs of this club, around 850 funds. Most estimates calculate that this group of people oversee the lion’s share of the hedge fund industry’s total capital, and by paying attention to their first-class equity investments, Insider Monkey has unsheathed a number of investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind let’s take a look at the key hedge fund action surrounding NVIDIA Corporation (NASDAQ:NVDA).
What have hedge funds been doing with NVIDIA Corporation (NASDAQ:NVDA)?
At Q3’s end, a total of 82 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NVDA 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.
Among these funds, GQG Partners held the most valuable stake in NVIDIA Corporation (NASDAQ:NVDA), which was worth $2542.4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $2386.6 million worth of shares. Arrowstreet Capital, Fisher Asset Management, and D E Shaw 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 GQG Partners allocated the biggest weight to NVIDIA Corporation (NASDAQ:NVDA), around 8.7% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, designating 6.77 percent of its 13F equity portfolio to NVDA.
Since NVIDIA Corporation (NASDAQ:NVDA) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedge funds that slashed their positions entirely heading into Q4. At the top of the heap, Renaissance Technologies sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at close to $296.7 million in stock, and Larry Chen and Terry Zhang’s Tairen Capital was right behind this move, as the fund cut about $99.7 million worth. These moves are interesting, as total hedge fund interest was cut by 10 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as NVIDIA Corporation (NASDAQ:NVDA) but similarly valued. These stocks are The Home Depot, Inc. (NYSE:HD), UnitedHealth Group Inc. (NYSE:UNH), JPMorgan Chase & Co. (NYSE:JPM), Verizon Communications Inc. (NYSE:VZ), Adobe Inc. (NASDAQ:ADBE), Paypal Holdings Inc (NASDAQ:PYPL), and salesforce.com, inc. (NYSE:CRM). All of these stocks’ market caps are similar to NVDA’s market cap.
|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 101 hedge funds with bullish positions and the average amount invested in these stocks was $7972 million. That figure was $7672 million in NVDA’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Verizon Communications Inc. (NYSE:VZ) is the least popular one with only 65 bullish hedge fund positions. NVIDIA Corporation (NASDAQ:NVDA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NVDA is 30.9. 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 November 27th and surpassed the market again by 16.1 percentage points. Unfortunately NVDA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NVDA investors were disappointed as the stock returned -2% since the end of September (through 11/27) 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.