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Nutanix, Inc. (NTNX) Fell Out Of Favor With Hedge Funds?

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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Nutanix, Inc. (NASDAQ:NTNX).

Hedge fund interest in Nutanix, Inc. (NASDAQ:NTNX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NTNX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Tilray, Inc. (NASDAQ:TLRY), OneMain Holdings Inc (NYSE:OMF), and Beam Therapeutics Inc. (NASDAQ:BEAM) to gather more data points.

If you'd ask most market participants, hedge funds are perceived as worthless, old financial tools of yesteryear. While there are more than 8000 funds trading at present, Our researchers look at the elite of this club, approximately 850 funds. These money managers preside over the majority of all hedge funds' total asset base, and by monitoring their finest equity investments, Insider Monkey has revealed several investment strategies that have historically beaten the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

David Blood
David Blood

David Blood of Generation Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Keeping this in mind let's take a look at the latest hedge fund action regarding Nutanix, Inc. (NASDAQ:NTNX).

Do Hedge Funds Think NTNX Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in NTNX a year ago. 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 Nutanix, Inc. (NASDAQ:NTNX) was held by Generation Investment Management, which reported holding $718.3 million worth of stock at the end of June. It was followed by Crosslink Capital with a $81.5 million position. Other investors bullish on the company included Atreides Management, Two Sigma Advisors, and Schonfeld Strategic Advisors. In terms of the portfolio weights assigned to each position Crosslink Capital allocated the biggest weight to Nutanix, Inc. (NASDAQ:NTNX), around 13.47% of its 13F portfolio. Shelter Haven Capital Management is also relatively very bullish on the stock, designating 6.14 percent of its 13F equity portfolio to NTNX.

Because Nutanix, Inc. (NASDAQ:NTNX) has faced a decline in interest from the smart money, we can see that there lies a certain "tier" of hedge funds that decided to sell off their full holdings by the end of the second quarter. It's worth mentioning that Michael Rockefeller and KarláKroeker's Woodline Partners sold off the biggest stake of the 750 funds monitored by Insider Monkey, totaling close to $28.5 million in stock, and Xiuping Li's Opti Capital Management was right behind this move, as the fund cut about $3.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Nutanix, Inc. (NASDAQ:NTNX) but similarly valued. We will take a look at Tilray, Inc. (NASDAQ:TLRY), OneMain Holdings Inc (NYSE:OMF), Beam Therapeutics Inc. (NASDAQ:BEAM), United Therapeutics Corporation (NASDAQ:UTHR), YETI Holdings, Inc. (NYSE:YETI), Kinross Gold Corporation (NYSE:KGC), and Mobile TeleSystems Public Joint Stock Company (NYSE:MBT). This group of stocks' market caps match NTNX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TLRY,17,94865,-4 OMF,41,994909,-2 BEAM,21,1771681,3 UTHR,45,2334119,3 YETI,34,282409,4 KGC,28,360274,1 MBT,10,293155,-1 Average,28,875916,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $876 million. That figure was $1166 million in NTNX's case. United Therapeutics Corporation (NASDAQ:UTHR) is the most popular stock in this table. On the other hand Mobile TeleSystems Public Joint Stock Company (NYSE:MBT) is the least popular one with only 10 bullish hedge fund positions. Nutanix, Inc. (NASDAQ:NTNX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NTNX is 54.5. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately NTNX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NTNX were disappointed as the stock returned -8.3% since the end of June (through 10/15) 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.