We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 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 NovoCure Limited (NASDAQ:NVCR).
NovoCure Limited (NASDAQ:NVCR) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds' portfolios at the end of September. At the end of this article we will also compare NVCR to other stocks including 58.com Inc (NYSE:WUBA), Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM), and Elbit Systems Ltd. (NASDAQ:ESLT) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are perceived as underperforming, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open today, Our researchers choose to focus on the crème de la crème of this group, around 750 funds. These investment experts preside over the lion's share of all hedge funds' total asset base, and by watching their top stock picks, Insider Monkey has uncovered various investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_673876" align="aligncenter" width="1613"] John Overdeck of Two Sigma Advisors[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a peek at the latest hedge fund action encompassing NovoCure Limited (NASDAQ:NVCR).
How are hedge funds trading NovoCure Limited (NASDAQ:NVCR)?
At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. By comparison, 20 hedge funds held shares or bullish call options in NVCR a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of NovoCure Limited (NASDAQ:NVCR), with a stake worth $177.7 million reported as of the end of September. Trailing Renaissance Technologies was Darsana Capital Partners, which amassed a stake valued at $74.8 million. Two Sigma Advisors, D E Shaw, and Rock Springs Capital 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 Darsana Capital Partners allocated the biggest weight to NovoCure Limited (NASDAQ:NVCR), around 2.77% of its 13F portfolio. Courage Capital is also relatively very bullish on the stock, dishing out 1.2 percent of its 13F equity portfolio to NVCR.
Judging by the fact that NovoCure Limited (NASDAQ:NVCR) has experienced declining sentiment from the smart money, we can see that there lies a certain "tier" of hedge funds that slashed their full holdings last quarter. Intriguingly, Farallon Capital dumped the biggest investment of the 750 funds watched by Insider Monkey, worth close to $75.9 million in call options. Benjamin A. Smith's fund, Laurion Capital Management, also dropped its call options, about $13.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as NovoCure Limited (NASDAQ:NVCR) but similarly valued. These stocks are 58.com Inc (NYSE:WUBA), Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM), Elbit Systems Ltd. (NASDAQ:ESLT), and Brookfield Renewable Partners L.P. (NYSE:BEP). This group of stocks' market valuations are similar to NVCR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WUBA,24,331607,2 SQM,8,19977,1 ESLT,3,15834,-2 BEP,4,7529,0 Average,9.75,93737,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $376 million in NVCR's case. 58.com Inc (NYSE:WUBA) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 3 bullish hedge fund positions. NovoCure Limited (NASDAQ:NVCR) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on NVCR as the stock returned 23.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.