Should I Buy NovoCure Limited (NVCR)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded NovoCure Limited (NASDAQ:NVCR) based on those filings.

NovoCure Limited (NASDAQ:NVCR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that NVCR 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 Alliant Energy Corporation (NASDAQ:LNT), Evergy, Inc. (NYSE:EVRG), and Mohawk Industries, Inc. (NYSE:MHK) to gather more data points.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Henrik Rhenman of Rhenman & Partners Asset Management

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. Keeping this in mind we’re going to take a look at the latest hedge fund action regarding NovoCure Limited (NASDAQ:NVCR).

Do Hedge Funds Think NVCR Is A Good Stock To Buy Now?

At first quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NVCR over the last 23 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.

According to Insider Monkey’s hedge fund database, Anand Desai’s Darsana Capital Partners has the number one position in NovoCure Limited (NASDAQ:NVCR), worth close to $66.1 million, accounting for 1.8% of its total 13F portfolio. Coming in second is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $59.7 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish contain Renaissance Technologies, Henrik Rhenman’s Rhenman & Partners Asset Management and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Montanaro Asset Management allocated the biggest weight to NovoCure Limited (NASDAQ:NVCR), around 2.23% of its 13F portfolio. Darsana Capital Partners is also relatively very bullish on the stock, designating 1.85 percent of its 13F equity portfolio to NVCR.

Because NovoCure Limited (NASDAQ:NVCR) has faced declining sentiment from hedge fund managers, logic holds that there was a specific group of funds who were dropping their positions entirely heading into Q2. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $19.8 million in stock. Wen Han Li’s fund, Andar Capital, also dumped its stock, about $10.6 million worth. These transactions 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 – not necessarily in the same industry as NovoCure Limited (NASDAQ:NVCR) but similarly valued. These stocks are Alliant Energy Corporation (NASDAQ:LNT), Evergy, Inc. (NYSE:EVRG), Mohawk Industries, Inc. (NYSE:MHK), Tenaris S.A. (NYSE:TS), Novavax, Inc. (NASDAQ:NVAX), W.R. Berkley Corporation (NYSE:WRB), and Telefonica Brasil SA (NYSE:VIV). This group of stocks’ market values are similar to NVCR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LNT 13 98600 -16
EVRG 30 1197999 -3
MHK 36 1297287 -3
TS 10 327456 -2
NVAX 38 1271331 1
WRB 32 644589 -5
VIV 9 90185 1
Average 24 703921 -3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $704 million. That figure was $292 million in NVCR’s case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 9 bullish hedge fund positions. NovoCure Limited (NASDAQ:NVCR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NVCR is 51.9. 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. 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 NVCR as the stock returned 38.1% since the end of the first quarter (through 7/16) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.