Novo Nordisk A/S (NVO): Hedge Funds In Wait-and-See Mode

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Novo Nordisk A/S (NYSE:NVO) based on that data and determine whether they were really smart about the stock.

Hedge fund interest in Novo Nordisk A/S (NYSE:NVO) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NVO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare NVO to other stocks including NIKE, Inc. (NYSE:NKE), The Unilever Group (NYSE:UL), and Thermo Fisher Scientific Inc. (NYSE:TMO) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most stock holders, hedge funds are assumed to be worthless, old investment tools of yesteryear. While there are more than 8000 funds with their doors open today, Our experts hone in on the elite of this club, around 850 funds. These money managers handle the majority of the smart money’s total capital, and by observing their matchless picks, Insider Monkey has unsheathed a few investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Tom Gayner

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now we’re going to view the recent hedge fund action encompassing Novo Nordisk A/S (NYSE:NVO).

What does smart money think about Novo Nordisk A/S (NYSE:NVO)?

Heading into the third quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NVO over the last 20 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Novo Nordisk A/S (NYSE:NVO), worth close to $1.8799 billion, amounting to 1.6% of its total 13F portfolio. The second largest stake is held by Fisher Asset Management, led by Ken Fisher, holding a $1.0138 billion position; the fund has 1% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Tom Gayner’s Markel Gayner Asset Management and Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund. In terms of the portfolio weights assigned to each position Sphera Global Healthcare Fund allocated the biggest weight to Novo Nordisk A/S (NYSE:NVO), around 2.46% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, designating 2.44 percent of its 13F equity portfolio to NVO.

Because Novo Nordisk A/S (NYSE:NVO) has faced falling interest from the smart money, logic holds that there is a sect of fund managers that slashed their positions entirely by the end of the second quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest stake of the 750 funds watched by Insider Monkey, totaling an estimated $5.6 million in stock, and Bhagwan Jay Rao’s Integral Health Asset Management was right behind this move, as the fund said goodbye to about $3.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Novo Nordisk A/S (NYSE:NVO). These stocks are NIKE, Inc. (NYSE:NKE), The Unilever Group (NYSE:UL), Thermo Fisher Scientific Inc. (NYSE:TMO), AstraZeneca plc (NASDAQ:AZN), Amgen, Inc. (NASDAQ:AMGN), China Mobile Limited (NYSE:CHL), and McDonald’s Corporation (NYSE:MCD). This group of stocks’ market valuations are similar to NVO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NKE 71 2603242 -9
UL 13 149078 0
TMO 73 4525711 -7
AZN 38 1920506 12
AMGN 51 1794209 -1
CHL 9 456289 -2
MCD 57 1356732 -9
Average 44.6 1829395 -2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.6 hedge funds with bullish positions and the average amount invested in these stocks was $1829 million. That figure was $3294 million in NVO’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 9 bullish hedge fund positions. Novo Nordisk A/S (NYSE:NVO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NVO is 45.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately NVO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NVO investors were disappointed as the stock returned 6.3% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.