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Were Hedge Funds Right About NVIDIA Corporation (NVDA)?

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April 22, 2020

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards NVIDIA Corporation (NASDAQ:NVDA).

NVIDIA Corporation (NASDAQ:NVDA) investors should be aware of an increase in hedge fund interest recently. NVDA was in 79 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 56 hedge funds in our database with NVDA positions at the end of the previous quarter. Our calculations also showed that NVDA 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.

Philippe Laffont of Coatue Management

COATUE MANAGEMENTCOATUE MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations We are probably at the peak of the COVID-19 pandemic, so we check out this biotech investor’s coronavirus picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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. Keeping this in mind let’s review the fresh hedge fund action surrounding NVIDIA Corporation (NASDAQ:NVDA).

What have hedge funds been doing with NVIDIA Corporation (NASDAQ:NVDA)?

At Q4’s end, a total of 79 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NVDA over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in NVIDIA Corporation (NASDAQ:NVDA), which was worth $833.7 million at the end of the third quarter. On the second spot was GQG Partners which amassed $572.3 million worth of shares. Citadel Investment Group, Coatue Management, and Fisher Asset 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 Atreides Management allocated the biggest weight to NVIDIA Corporation (NASDAQ:NVDA), around 7.64% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, setting aside 5.37 percent of its 13F equity portfolio to NVDA.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. GQG Partners, managed by Rajiv Jain, established the biggest position in NVIDIA Corporation (NASDAQ:NVDA). GQG Partners had $572.3 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $100.7 million position during the quarter. The other funds with new positions in the stock are Michael Rockefeller and Karl Kroeker’s Woodline Partners, Mikal Patel’s Oribel Capital Management, and Gavin Baker’s Atreides Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as NVIDIA Corporation (NASDAQ:NVDA) but similarly valued. We will take a look at Amgen, Inc. (NASDAQ:AMGN), TOTAL S.A. (NYSE:TOT), Netflix, Inc. (NASDAQ:NFLX), and BHP Group (NYSE:BHP). This group of stocks’ market values are closest to NVDA’s market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMGN,58,2290267,3 TOT,17,1195776,-1 NFLX,114,13080883,11 BHP,20,886421,-4 Average,52.25,4363337,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.25 hedge funds with bullish positions and the average amount invested in these stocks was $4363 million. That figure was $3179 million in NVDA’s case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand TOTAL S.A. (NYSE:TOT) is the least popular one with only 17 bullish hedge fund positions. NVIDIA Corporation (NASDAQ:NVDA) is not the most popular stock in this group but hedge fund interest is still above 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 lost 1.0% in 2020 through April 20th but still beat the market by 11 percentage points. Hedge funds were also right about betting on NVDA as the stock returned 22.1% in 2020 (through April 20th) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds5 Most Popular Stocks Among Hedge Funds

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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