In this article you are going to find out whether hedge funds think Novo Nordisk A/S (NYSE:NVO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Novo Nordisk A/S (NYSE:NVO) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that NVO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Costco Wholesale Corporation (NASDAQ:COST), T-Mobile US, Inc. (NASDAQ:TMUS), and Citigroup Inc. (NYSE:C) to gather more data points.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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 gander at the recent hedge fund action surrounding Novo Nordisk A/S (NYSE:NVO).
Do Hedge Funds Think NVO Is A Good Stock To Buy Now?
At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in NVO a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Novo Nordisk A/S (NYSE:NVO) was held by Renaissance Technologies, which reported holding $1675.2 million worth of stock at the end of December. It was followed by Fisher Asset Management with a $1082.4 million position. Other investors bullish on the company included Markel Gayner Asset Management, Alyeska Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Novo Nordisk A/S (NYSE:NVO), around 2.08% of its 13F portfolio. Markel Gayner Asset Management is also relatively very bullish on the stock, setting aside 1 percent of its 13F equity portfolio to NVO.
Since Novo Nordisk A/S (NYSE:NVO) has faced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few hedgies that elected to cut their full holdings in the first quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising about $46.5 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $1.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Novo Nordisk A/S (NYSE:NVO). These stocks are Costco Wholesale Corporation (NASDAQ:COST), T-Mobile US, Inc. (NASDAQ:TMUS), Citigroup Inc. (NYSE:C), Royal Dutch Shell plc (NYSE:RDS), Honeywell International Inc. (NASDAQ:HON), QUALCOMM, Incorporated (NASDAQ:QCOM), and The Boeing Company (NYSE:BA). This group of stocks’ market values are similar to NVO’s market value.
|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 66.9 hedge funds with bullish positions and the average amount invested in these stocks was $4019 million. That figure was $2930 million in NVO’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand Royal Dutch Shell plc (NYSE:RDS) is the least popular one with only 36 bullish hedge fund positions. Compared to these stocks Novo Nordisk A/S (NYSE:NVO) is even less popular than RDS. Our overall hedge fund sentiment score for NVO is 32.6. 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. Hedge funds clearly dropped the ball on NVO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on NVO as the stock returned 31.5% since Q1 (through July 16th) and outperformed the market by an even larger margin.
Follow Novo Nordisk A S (NYSE:NVO)
Follow Novo Nordisk A S (NYSE:NVO)
- 10 Best Silver Mining Stocks to Invest In
- 10 Top Hedge Funds Focusing on ESG and Impact Investing
- George Soros’ Top 10 Stock Picks
Disclosure: None. This article was originally published at Insider Monkey.