Before we spend days researching a stock idea we'd like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about Nutanix, Inc. (NASDAQ:NTNX).
Nutanix, Inc. (NASDAQ:NTNX) was in 36 hedge funds' portfolios at the end of March. NTNX shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. There were 37 hedge funds in our database with NTNX holdings at the end of the previous quarter. Our calculations also showed that ntnx isn't among the 30 most popular stocks among hedge funds.
In the financial world there are dozens of metrics stock market investors put to use to assess stocks. Two of the most useful metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can trounce the broader indices by a solid amount (see the details here).
[caption id="attachment_750230" align="aligncenter" width="473"] Brad Gerstner of Altimeter Capital[/caption]
Let's take a glance at the new hedge fund action regarding Nutanix, Inc. (NASDAQ:NTNX).
How are hedge funds trading Nutanix, Inc. (NASDAQ:NTNX)?
At Q1's end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NTNX over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Nutanix, Inc. (NASDAQ:NTNX) was held by Altimeter Capital Management, which reported holding $79.3 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $76 million position. Other investors bullish on the company included Castle Hook Partners, Point72 Asset Management, and Bloom Tree Partners.
Judging by the fact that Nutanix, Inc. (NASDAQ:NTNX) has experienced declining sentiment from the smart money, we can see that there were a few hedge funds who sold off their entire stakes in the third quarter. Intriguingly, Ryan Frick and Oliver Evans's Dorsal Capital Management dumped the largest stake of all the hedgies followed by Insider Monkey, worth an estimated $37.4 million in stock. Brian Ashford-Russell and Tim Woolley's fund, Polar Capital, also sold off its stock, about $35.8 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds in the third quarter.
Let's also examine hedge fund activity in other stocks similar to Nutanix, Inc. (NASDAQ:NTNX). We will take a look at Foot Locker, Inc. (NYSE:FL), KAR Auction Services Inc (NYSE:KAR), YY Inc (NASDAQ:YY), and WABCO Holdings Inc. (NYSE:WBC). This group of stocks' market valuations resemble NTNX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FL,35,956263,0 KAR,42,1234048,8 YY,20,129700,-4 WBC,36,801213,22 Average,33.25,780306,6.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $780 million. That figure was $456 million in NTNX's case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand YY Inc (NASDAQ:YY) is the least popular one with only 20 bullish hedge fund positions. Nutanix, Inc. (NASDAQ:NTNX) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately NTNX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NTNX were disappointed as the stock returned -13.4% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.