We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Novanta Inc. (NASDAQ:NOVT).
Is Novanta Inc. (NASDAQ:NOVT) the right investment to pursue these days? Hedge funds are taking a bearish view. The number of bullish hedge fund positions fell by 4 in recent months. Our calculations also showed that NOVT isn't among the 30 most popular stocks among hedge funds (view the video below). NOVT was in 13 hedge funds' portfolios at the end of June. There were 17 hedge funds in our database with NOVT holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are tons of formulas stock market investors use to analyze stocks. A pair of the most under-the-radar formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top money managers can outclass the S&P 500 by a very impressive amount (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's go over the fresh hedge fund action surrounding Novanta Inc. (NASDAQ:NOVT).
How have hedgies been trading Novanta Inc. (NASDAQ:NOVT)?
Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NOVT over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies has the largest position in Novanta Inc. (NASDAQ:NOVT), worth close to $36.3 million, comprising less than 0.1%% of its total 13F portfolio. On Renaissance Technologies's heels is Thames Capital Management, managed by Jay Genzer, which holds a $12.1 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Andrew Sandler's Sandler Capital Management, Chuck Royce's Royce & Associates and Charles Paquelet's Skylands Capital.
Since Novanta Inc. (NASDAQ:NOVT) has witnessed a decline in interest from the smart money, it's easy to see that there is a sect of hedge funds who sold off their entire stakes in the second quarter. At the top of the heap, Mariko Gordon's Daruma Asset Management said goodbye to the largest stake of the "upper crust" of funds watched by Insider Monkey, totaling about $27.8 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund cut about $6.7 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds in the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Novanta Inc. (NASDAQ:NOVT) but similarly valued. We will take a look at Physicians Realty Trust (NYSE:DOC), Dicks Sporting Goods Inc (NYSE:DKS), FS KKR Capital Corp. (NYSE:FSK), and Rogers Corporation (NYSE:ROG). This group of stocks' market valuations resemble NOVT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DOC,12,47665,1 DKS,23,324924,3 FSK,16,223657,-3 ROG,19,77827,10 Average,17.5,168518,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $70 million in NOVT's case. Dicks Sporting Goods Inc (NYSE:DKS) is the most popular stock in this table. On the other hand Physicians Realty Trust (NYSE:DOC) is the least popular one with only 12 bullish hedge fund positions. Novanta Inc. (NASDAQ:NOVT) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NOVT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NOVT investors were disappointed as the stock returned -13.3% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.