Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about NVIDIA Corporation (NASDAQ:NVDA).
Is NVDA stock a buy or sell? NVIDIA Corporation (NASDAQ:NVDA) investors should pay attention to an increase in enthusiasm from smart money of late. NVIDIA Corporation (NASDAQ:NVDA) was in 88 hedge funds’ portfolios at the end of December. The all time high for this statistic is 95. Our calculations also showed that NVDA isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best hydrogen fuel cell 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 (or at the end of this article). Keeping this in mind we’re going to take a peek at the key hedge fund action surrounding NVIDIA Corporation (NASDAQ:NVDA).
Do Hedge Funds Think NVDA Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 88 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NVDA over the last 22 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Rajiv Jain’s GQG Partners has the most valuable position in NVIDIA Corporation (NASDAQ:NVDA), worth close to $1.9498 billion, comprising 6.7% of its total 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $1.3244 billion position; the fund has 1.9% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Israel Englander’s Millennium Management, Ken Fisher’s Fisher Asset Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position GQG Partners allocated the biggest weight to NVIDIA Corporation (NASDAQ:NVDA), around 6.69% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, designating 5.99 percent of its 13F equity portfolio to NVDA.
Now, some big names have jumped into NVIDIA Corporation (NASDAQ:NVDA) headfirst. Renaissance Technologies, initiated the most valuable position in NVIDIA Corporation (NASDAQ:NVDA). Renaissance Technologies had $523.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $341.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, David Fiszel’s Honeycomb Asset Management, and Chris Rokos’s Rokos Capital Management.
Let’s now review 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), Paypal Holdings Inc (NASDAQ:PYPL), Bank of America Corporation (NYSE:BAC), Verizon Communications Inc. (NYSE:VZ), Adobe Inc. (NASDAQ:ADBE), Comcast Corporation (NASDAQ:CMCSA), and Netflix, Inc. (NASDAQ:NFLX). This group of stocks’ market valuations match NVDA’s market valuation.
|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 100.9 hedge funds with bullish positions and the average amount invested in these stocks was $14732 million. That figure was $8692 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 67 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 50.9. 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 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 7% in 2021 through March 12th and surpassed the market again by 1.6 percentage points. Unfortunately NVDA wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); NVDA investors were disappointed as the stock returned -1.5% since the end of December (through 3/12) 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.