Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Novartis AG (NYSE:NVS).
Novartis AG (NYSE:NVS) investors should be aware of an increase in hedge fund interest recently. NVS was in 30 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 28 hedge funds in our database with NVS positions at the end of the previous quarter. Our calculations also showed that NVS isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26357" align="aligncenter" width="353"] Ken Fisher of Fisher Asset 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 this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's review the latest hedge fund action surrounding Novartis AG (NYSE:NVS).
Hedge fund activity in Novartis AG (NYSE:NVS)
At Q4's end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in NVS over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Ken Fisher's Fisher Asset Management has the largest position in Novartis AG (NYSE:NVS), worth close to $797.5 million, comprising 0.8% of its total 13F portfolio. On Fisher Asset Management's heels is Renaissance Technologies, holding a $625.1 million position; 0.5% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Anand Parekh's Alyeska Investment Group and Jeremy Green's Redmile Group. In terms of the portfolio weights assigned to each position Bourgeon Capital allocated the biggest weight to Novartis AG (NYSE:NVS), around 2.47% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, designating 1.98 percent of its 13F equity portfolio to NVS.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Redmile Group, managed by Jeremy Green, created the largest position in Novartis AG (NYSE:NVS). Redmile Group had $54.3 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson's Adage Capital Management also initiated a $11.8 million position during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, Nick Thakore's Diametric Capital, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Novartis AG (NYSE:NVS) but similarly valued. These stocks are Comcast Corporation (NASDAQ:CMCSA), Cisco Systems, Inc. (NASDAQ:CSCO), Toyota Motor Corporation (NYSE:TM), and PepsiCo, Inc. (NASDAQ:PEP). This group of stocks' market valuations are closest to NVS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CMCSA,87,6747748,-3 CSCO,68,4029813,3 TM,12,249046,0 PEP,59,3107057,-4 Average,56.5,3533416,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 56.5 hedge funds with bullish positions and the average amount invested in these stocks was $3533 million. That figure was $2055 million in NVS's case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 12 bullish hedge fund positions. Novartis AG (NYSE:NVS) is not the least popular stock in this group but hedge fund interest is still below average. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. A small number of hedge funds were also right about betting on NVS, though not to the same extent, as the stock returned -8.7% during the same time period and outperformed the market. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.