Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Novanta Inc. (NASDAQ:NOVT) to find out whether it was one of their high conviction long-term ideas.
Is Novanta Inc. (NASDAQ:NOVT) a safe investment right now? Prominent investors are turning less bullish. The number of long hedge fund positions dropped by 2 recently. Our calculations also showed that NOVT isn't among the 30 most popular stocks among hedge funds. NOVT was in 17 hedge funds' portfolios at the end of March. There were 19 hedge funds in our database with NOVT positions at the end of the previous quarter.
To most shareholders, hedge funds are viewed as unimportant, old investment vehicles of yesteryear. While there are more than 8000 funds trading at present, Our researchers hone in on the top tier of this group, about 750 funds. These hedge fund managers shepherd most of the hedge fund industry's total asset base, and by watching their first-class equity investments, Insider Monkey has determined numerous investment strategies that have historically outstripped Mr. Market. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
Let's analyze the new hedge fund action regarding Novanta Inc. (NASDAQ:NOVT).
What have hedge funds been doing with Novanta Inc. (NASDAQ:NOVT)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NOVT over the last 15 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.
Among these funds, Renaissance Technologies held the most valuable stake in Novanta Inc. (NASDAQ:NOVT), which was worth $40.3 million at the end of the first quarter. On the second spot was Daruma Asset Management which amassed $27.8 million worth of shares. Moreover, Sandler Capital Management, Thames Capital Management, and Arrowstreet Capital were also bullish on Novanta Inc. (NASDAQ:NOVT), allocating a large percentage of their portfolios to this stock.
Seeing as Novanta Inc. (NASDAQ:NOVT) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of hedge funds that decided to sell off their positions entirely by the end of the third quarter. It's worth mentioning that David Costen Haley's HBK Investments dumped the biggest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $0.4 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also said goodbye to its stock, about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Novanta Inc. (NASDAQ:NOVT). These stocks are Federated Investors Inc (NYSE:FII), CVB Financial Corp. (NASDAQ:CVBF), Chemical Financial Corporation (NASDAQ:CHFC), and UniFirst Corp (NYSE:UNF). This group of stocks' market caps resemble NOVT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FII,13,131316,-2 CVBF,12,41422,3 CHFC,18,96012,8 UNF,21,163958,7 Average,16,108177,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $123 million in NOVT's case. UniFirst Corp (NYSE:UNF) is the most popular stock in this table. On the other hand CVB Financial Corp. (NASDAQ:CVBF) is the least popular one with only 12 bullish hedge fund positions. Novanta Inc. (NASDAQ:NOVT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on NOVT as the stock returned 7.4% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.