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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Novavax, Inc. (NASDAQ:NVAX). NVAX doesn't have any approved COVID-19 vaccines yet, but in the process of developing vaccines for kids and teenagers. Its COVID-19 vaccine targeting adults showed similar efficacy rates as Pfizer's and Moderna's vaccines. Given that NVAX is trading at a fraction of MRNA's valuation, we think it may be a better stock to buy than Moderna.
Is NVAX stock a buy? Novavax, Inc. (NASDAQ:NVAX) has experienced an increase in hedge fund interest in recent months. Novavax, Inc. (NASDAQ:NVAX) was in 37 hedge funds' portfolios at the end of December. The all time high for this statistic is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NVAX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Peter Kolchinsky of RA Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let's analyze the recent hedge fund action surrounding Novavax, Inc. (NASDAQ:NVAX).
Do Hedge Funds Think NVAX Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in NVAX a year ago. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Novavax, Inc. (NASDAQ:NVAX) was held by RA Capital Management, which reported holding $422.5 million worth of stock at the end of December. It was followed by Perceptive Advisors with a $116.3 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 Discovery Capital Management allocated the biggest weight to Novavax, Inc. (NASDAQ:NVAX), around 6.79% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, designating 5.91 percent of its 13F equity portfolio to NVAX.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Deerfield Management, managed by James E. Flynn, initiated the largest position in Novavax, Inc. (NASDAQ:NVAX). Deerfield Management had $31.3 million invested in the company at the end of the quarter. Farallon Capital also made a $30.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Christopher James's Partner Fund Management, Kenneth Tropin's Graham Capital Management, and Chris Rokos's Rokos Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Novavax, Inc. (NASDAQ:NVAX) but similarly valued. We will take a look at McAfee Corp. (NASDAQ:MCFE), Syneos Health, Inc. (NASDAQ:SYNH), First Horizon National Corporation (NYSE:FHN), Donaldson Company, Inc. (NYSE:DCI), Redfin Corporation (NASDAQ:RDFN), SiteOne Landscape Supply, Inc. (NYSE:SITE), and Royal Gold, Inc (NASDAQ:RGLD). This group of stocks' market values match NVAX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MCFE,20,257825,20 SYNH,29,592871,-11 FHN,30,403346,0 DCI,26,311896,-4 RDFN,21,209673,-7 SITE,17,72044,-11 RGLD,26,284227,-4 Average,24.1,304555,-2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $305 million. That figure was $1004 million in NVAX's case. First Horizon National Corporation (NYSE:FHN) is the most popular stock in this table. On the other hand SiteOne Landscape Supply, Inc. (NYSE:SITE) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Novavax, Inc. (NASDAQ:NVAX) is more popular among hedge funds. Our overall hedge fund sentiment score for NVAX is 86. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7.9% in 2021 through April 1st but still managed to beat the market by 0.4 percentage points. Hedge funds were also right about betting on NVAX as the stock returned 66.6% since the end of December (through 4/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.