Thanks to an 11.55% rally yesterday, June 23, Novavax, Inc. (NASDAQ:NVAX) closed at $11.11 per share and shot above the 90% year-to-date mark in terms of share price growth. Is it too late to board this gravy train, or do the tracks continue on into higher realms of return goodness? The firm’s share price at the end of yesterday’s trading session hit its 52-week high, which is unsurprising after such explosive growth. During that one year period, shares of the company surged 122.2%. Gains like that, and running at 52-week highs tends to signal a pull back is imminent, which happened in late March after a similar burst of gains through the previous two months. We’re in the midst of another such burst right now, with shares of the vaccine firm having appreciated by 25% since June 16. On June 18, Novavax, Inc. named Gail K. Boudreaux to its Board of Directors. The executive was most recently Executive Vice President of UnitedHealth Group Inc. (NYSE:UNH) where she served from May 2008 through February 2015. A 30-year veteran in healthcare, Ms. Boudreaux was also the Chief Executive Officer of UnitedHealthcare from January 2011 to November 2014. Novavax, Inc. also recently announced that The Washington Post has recognized it as a Top Workplace for 2015 for the second consecutive year.
Novavax, Inc. (NASDAQ:NVAX) can also count heightened support from hedge funds among its recent string of good news. The firm was in 18 hedge funds’ portfolios at the end of March, more that the 15 hedge funds from our database with Novavax positions at the end of the previous quarter.
We follow hedge funds because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 142%, outperforming the S&P 500 ETF by nearly 85 percentage points (see more details here).
Other activities hedge fund intelligence site Insider Monkey follows are purchases or sales of company shares by insiders. Recent insider purchases or sales provide everyday investors with a window into whether or not a firm’s top management team is confident in the performance of their company. In the case of Novavax, Inc. (NASDAQ:NVAX), there were both sales and purchases of shares by insiders in the first two quarters of 2015. In terms of purchases, there were seven insiders who purchased shares in the company on January 31. These are President and CEO Stanley Erck (6,122 shares), Senior Vice President for Research and Development Gregory Glenn (866 shares), Senior Vice President for Manufacturing Jon Timothy Hahn (9,329 shares), Senior Vice President and General Counsel John Herrmann III (9,869 shares), Chief Financial Officer Barclay Phillips (8,388 shares), Senior Vice President for Commercial Operations John Trizino (6,611 shares) and Senior Vice President for Business Development Russel Wilson (5,050 shares). However, there were also recent share sales by insiders of Novavax, Inc. Director James Young sold 25,000 shares on June 18. The biggest seller, however, is Rajiv Modi, also a director at the company. In 11 transactions starting on May 28, Modi sold 5 million Novavax shares.
With all of this in mind, let’s go over the latest hedge fund action surrounding Novavax, Inc. (NASDAQ:NVAX).
How are hedge funds trading Novavax, Inc. (NASDAQ:NVAX)?
Heading into the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish in this stock, a change of 20% from one quarter earlier. Among these funds, the aggregate value of their holdings decreased to about $72.32 million by the end of the first quarter of 2015 from $76.09 million at the end of the last quarter of 2014. This was a decrease of 4.96%, a significant decline considering the share price increased by 39.46% in the first quarter of the year.
Baker Bros. Advisors, managed by Julian Baker and Felix Baker, holds the largest position in Novavax, Inc. (NASDAQ:NVAX) in our database. Baker Bros. Advisors has a $16.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second-most bullish hedge fund is RA Capital Management, managed by Peter Kolchinsky, which held an $11.8 million position: 1.2% of its 13F portfolio being allocated to the stock. Remaining hedgies that are bullish includes Bihua Chen’s Cormorant Asset Management, Robert B. Gillam’s McKinley Capital Management, and Kris Jenner, Gordon Bussard, and Graham McPhail’s Rock Springs Capital Management.
As one would reasonably expect, key hedge funds were breaking ground themselves. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most outsized new position in Novavax, Inc. (NASDAQ:NVAX). Laurion Capital Management had $2.9 million invested in the company at the end of the quarter. Paul Tudor Jones’ Tudor Investment Corp also made a $2.1 million investment in the stock during the quarter. The following funds were also among the new Novavax investors: Steve Cohen’s Point72 Asset Management, Peter Muller’s PDT Partners, and Richard Driehaus’ Driehaus Capital.
As more hedge funds were long in the stock despite a decrease in the value of holdings and some significant insider purchases were made recently, that would indicate sentiment is strong on the stock. However in light of its rapid appreciation and the fact that hedge funds were already pulling out capital by the end of the first quarter, before the stock gained another 36%, it’s hard to justify entering the stock at the current inflated price point. We would recommend holding off until some of the air is let out of this push and considering a buy at a more reasonable entry point.