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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Novavax, Inc. (NASDAQ:NVAX).
Is NVAX a good stock to buy? Novavax, Inc. (NASDAQ:NVAX) shareholders have witnessed a decrease in hedge fund interest lately. Novavax, Inc. (NASDAQ:NVAX) was in 37 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that NVAX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to check out the latest hedge fund action regarding Novavax, Inc. (NASDAQ:NVAX).
Do Hedge Funds Think NVAX Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in NVAX over the last 24 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.
The largest stake in Novavax, Inc. (NASDAQ:NVAX) was held by RA Capital Management, which reported holding $543.5 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $195.9 million position. Other investors bullish on the company included Citadel Investment Group, Rock Springs Capital Management, and Discovery Capital Management. In terms of the portfolio weights assigned to each position RA Capital Management allocated the biggest weight to Novavax, Inc. (NASDAQ:NVAX), around 8.72% of its 13F portfolio. Samsara BioCapital is also relatively very bullish on the stock, setting aside 5.21 percent of its 13F equity portfolio to NVAX.
Because Novavax, Inc. (NASDAQ:NVAX) has witnessed bearish sentiment from hedge fund managers, logic holds that there is a sect of hedge funds who sold off their full holdings heading into Q3. Interestingly, Renaissance Technologies sold off the largest stake of the "upper crust" of funds tracked by Insider Monkey, worth an estimated $122 million in stock, and Bihua Chen's Cormorant Asset Management was right behind this move, as the fund dumped about $45.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to Novavax, Inc. (NASDAQ:NVAX). We will take a look at Arch Capital Group Ltd. (NASDAQ:ACGL), Check Point Software Technologies Ltd. (NASDAQ:CHKP), Altice USA, Inc. (NYSE:ATUS), Natura &Co Holding S.A. (NYSE:NTCO), The Liberty SiriusXM Group (NASDAQ:LSXMA), XPO Logistics Inc (NYSE:XPO), and NICE Ltd (NASDAQ:NICE). This group of stocks' market values resemble NVAX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACGL,22,1438952,-12 CHKP,29,646892,-2 ATUS,44,3176106,-4 NTCO,5,62101,1 LSXMA,43,1926503,5 XPO,57,3137995,17 NICE,22,1035023,-11 Average,31.7,1631939,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $1632 million. That figure was $1172 million in NVAX's case. XPO Logistics Inc (NYSE:XPO) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 5 bullish hedge fund positions. Novavax, Inc. (NASDAQ:NVAX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NVAX is 64. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately NVAX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NVAX were disappointed as the stock returned -22.1% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.