Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Nutanix, Inc. (NASDAQ:NTNX).
Nutanix, Inc. (NASDAQ:NTNX) has experienced an increase in support from the world's most elite money managers of late. Our calculations also showed that NTNX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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. 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 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_339739" align="aligncenter" width="400"] Ricky Sandler of Eminence Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's analyze the key hedge fund action surrounding Nutanix, Inc. (NASDAQ:NTNX).
How have hedgies been trading Nutanix, Inc. (NASDAQ:NTNX)?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in NTNX 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 Nutanix, Inc. (NASDAQ:NTNX) was held by Generation Investment Management, which reported holding $454.2 million worth of stock at the end of September. It was followed by Eminence Capital with a $160.5 million position. Other investors bullish on the company included Isomer Partners, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Isomer Partners allocated the biggest weight to Nutanix, Inc. (NASDAQ:NTNX), around 10.33% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, dishing out 6.25 percent of its 13F equity portfolio to NTNX.
As industrywide interest jumped, specific money managers have jumped into Nutanix, Inc. (NASDAQ:NTNX) headfirst. Cinctive Capital Management, managed by Richard SchimeláandáLawrence Sapanski, assembled the largest position in Nutanix, Inc. (NASDAQ:NTNX). Cinctive Capital Management had $5.1 million invested in the company at the end of the quarter. Matthew L Pinz's Pinz Capital also made a $2.3 million investment in the stock during the quarter. The other funds with brand new NTNX positions are Jinghua Yan's TwinBeech Capital, Donald Sussman's Paloma Partners, and Guy Shahar's DSAM Partners.
Let's now take a look at hedge fund activity in other stocks similar to Nutanix, Inc. (NASDAQ:NTNX). We will take a look at MKS Instruments, Inc. (NASDAQ:MKSI), Parsley Energy Inc (NYSE:PE), Wyndham Hotels & Resorts, Inc. (NYSE:WH), and ADT Corp (NYSE:ADT). This group of stocks' market valuations match NTNX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MKSI,28,445354,10 PE,52,1041267,4 WH,44,960213,4 ADT,21,193550,5 Average,36.25,660096,5.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $660 million. That figure was $855 million in NTNX's case. Parsley Energy Inc (NYSE:PE) is the most popular stock in this table. On the other hand ADT Corp (NYSE:ADT) is the least popular one with only 21 bullish hedge fund positions. Nutanix, Inc. (NASDAQ:NTNX) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately NTNX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NTNX investors were disappointed as the stock returned -42.2% during the same time 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 most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.