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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 NortonLifeLock Inc. (NASDAQ:NLOK) based on that data and determine whether they were really smart about the stock.
NortonLifeLock Inc. (NASDAQ:NLOK) shareholders have witnessed a decrease in hedge fund sentiment lately. NortonLifeLock Inc. (NASDAQ:NLOK) was in 37 hedge funds' portfolios at the end of June. The all time high for this statistics is 46. Our calculations also showed that NLOK 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are viewed as worthless, old financial tools of the past. While there are over 8000 funds in operation today, Our researchers look at the moguls of this club, around 850 funds. These investment experts orchestrate the lion's share of all hedge funds' total asset base, and by keeping an eye on their finest stock picks, Insider Monkey has unearthed various investment strategies that have historically defeated the market. Insider Monkey's flagship short hedge fund strategy beat 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 .
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. 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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we're going to review the new hedge fund action surrounding NortonLifeLock Inc. (NASDAQ:NLOK).
Hedge fund activity in NortonLifeLock Inc. (NASDAQ:NLOK)
At the end of June, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the first quarter of 2020. By comparison, 35 hedge funds held shares or bullish call options in NLOK a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Starboard Value LP held the most valuable stake in NortonLifeLock Inc. (NASDAQ:NLOK), which was worth $477.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $196.5 million worth of shares. AQR Capital Management, Soros Fund Management, and Park West Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to NortonLifeLock Inc. (NASDAQ:NLOK), around 17.02% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, setting aside 13.15 percent of its 13F equity portfolio to NLOK.
Seeing as NortonLifeLock Inc. (NASDAQ:NLOK) has faced bearish sentiment from the smart money, we can see that there exists a select few money managers who sold off their full holdings by the end of the second quarter. Intriguingly, Andrew Weiss's Weiss Asset Management sold off the largest stake of the "upper crust" of funds followed by Insider Monkey, worth an estimated $53 million in stock. Zachary Miller's fund, Parian Global Management, also cut its stock, about $18.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 5 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks similar to NortonLifeLock Inc. (NASDAQ:NLOK). We will take a look at Arch Capital Group Ltd. (NASDAQ:ACGL), PagSeguro Digital Ltd. (NYSE:PAGS), Expedia Group Inc (NASDAQ:EXPE), Brown & Brown, Inc. (NYSE:BRO), Open Text Corporation (NASDAQ:OTEX), Ceridian HCM Holding Inc. (NYSE:CDAY), and Shinhan Financial Group Co., Ltd. (NYSE:SHG). This group of stocks' market values match NLOK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACGL,36,1077194,3 PAGS,27,1013173,7 EXPE,61,3109490,20 BRO,24,633665,-2 OTEX,18,319502,0 CDAY,30,2098612,6 SHG,2,5215,-3 Average,28.3,1179550,4.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $1180 million. That figure was $1371 million in NLOK's case. Expedia Group Inc (NASDAQ:EXPE) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 2 bullish hedge fund positions. NortonLifeLock Inc. (NASDAQ:NLOK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NLOK is 53.8. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on NLOK as the stock returned 19.3% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.