At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Nutanix, Inc. (NASDAQ:NTNX).
Nutanix, Inc. (NASDAQ:NTNX) investors should pay attention to a decrease in activity from the world's largest hedge funds recently. Our calculations also showed that NTNX isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_189672" align="aligncenter" width="400"] David Blood of Generation Investment Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the key hedge fund action encompassing Nutanix, Inc. (NASDAQ:NTNX).
What does smart money think about Nutanix, Inc. (NASDAQ:NTNX)?
Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NTNX over the last 18 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 publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Generation Investment Management, managed by David Blood and Al Gore, holds the largest position in Nutanix, Inc. (NASDAQ:NTNX). Generation Investment Management has a $221.5 million position in the stock, comprising 1.6% of its 13F portfolio. The second most bullish fund manager is Ricky Sandler of Eminence Capital, with a $58.3 million position; 0.6% of its 13F portfolio is allocated to the company. Some other peers that hold long positions consist of Jerry Kochanski's Shelter Haven Capital Management, Brian Ashford-Russell and Tim Woolley's Polar Capital and Mendel Hui's Isomer Partners. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Nutanix, Inc. (NASDAQ:NTNX), around 9.79% of its 13F portfolio. Isomer Partners is also relatively very bullish on the stock, designating 9.03 percent of its 13F equity portfolio to NTNX.
Seeing as Nutanix, Inc. (NASDAQ:NTNX) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of funds who sold off their full holdings in the first quarter. Intriguingly, Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management said goodbye to the largest stake of the 750 funds followed by Insider Monkey, valued at about $5.1 million in stock, and Sahm Adrangi's Kerrisdale Capital was right behind this move, as the fund dropped about $5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds in the first quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Nutanix, Inc. (NASDAQ:NTNX) but similarly valued. These stocks are Mattel, Inc. (NASDAQ:MAT), FibroGen Inc (NASDAQ:FGEN), Unum Group (NYSE:UNM), and Rayonier Inc. (NYSE:RYN). This group of stocks' market valuations are closest to NTNX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MAT,17,474848,-2 FGEN,22,283279,1 UNM,25,159751,-5 RYN,13,271594,-1 Average,19.25,297368,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $440 million in NTNX's case. Unum Group (NYSE:UNM) is the most popular stock in this table. On the other hand Rayonier Inc. (NYSE:RYN) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Nutanix, Inc. (NASDAQ:NTNX) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on NTNX as the stock returned 52.3% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.