Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Novavax, Inc. (NASDAQ:NVAX) and see how the stock is affected by the recent hedge fund activity.
Novavax, Inc. (NASDAQ:NVAX) investors should pay attention to an increase in activity from the world's largest hedge funds of late. Our calculations also showed that NVAX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are seen as underperforming, old financial tools of yesteryear. While there are greater than 8000 funds trading at the moment, Our researchers look at the top tier of this club, about 750 funds. These money managers orchestrate the majority of the hedge fund industry's total asset base, and by observing their finest stock picks, Insider Monkey has brought to light many investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_26340" align="aligncenter" width="594"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to analyze the recent hedge fund action regarding Novavax, Inc. (NASDAQ:NVAX).
What does smart money think about Novavax, Inc. (NASDAQ:NVAX)?
Heading into the fourth quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 133% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NVAX over the last 17 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management has the biggest position in Novavax, Inc. (NASDAQ:NVAX), worth close to $0.8 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $0.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism encompass David Harding's Winton Capital Management, David E. Shaw's D E Shaw and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Rock Springs Capital Management allocated the biggest weight to Novavax, Inc. (NASDAQ:NVAX), around 0.03% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.0045 percent of its 13F equity portfolio to NVAX.
As industrywide interest jumped, key money managers have jumped into Novavax, Inc. (NASDAQ:NVAX) headfirst. Winton Capital Management, managed by David Harding, assembled the largest position in Novavax, Inc. (NASDAQ:NVAX). Winton Capital Management had $0.4 million invested in the company at the end of the quarter. David E. Shaw's D E Shaw also made a $0.1 million investment in the stock during the quarter. The other funds with brand new NVAX positions are Ken Griffin's Citadel Investment Group and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks similar to Novavax, Inc. (NASDAQ:NVAX). These stocks are PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS), Rhinebeck Bancorp, Inc. (NASDAQ:RBKB), Tanzanian Gold Corporation (NYSEAMERICAN:TRX), and Auryn Resources Inc. (NYSEAMERICAN:AUG). This group of stocks' market valuations are similar to NVAX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PHAS,10,16101,2 RBKB,2,7573,0 TRX,1,17,-1 AUG,3,596,1 Average,4,6072,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $2 million in NVAX's case. PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS) is the most popular stock in this table. On the other hand Tanzanian Royalty Gold Corporation (NYSEAMERICAN:TRX) is the least popular one with only 1 bullish hedge fund positions. Novavax, Inc. (NASDAQ:NVAX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NVAX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NVAX were disappointed as the stock returned -3.4% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.