We know that hedge funds generate strong, risk-adjusted returns in the long run, so mimicking picks where they are collectively strong can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyzes, spend a lot of resources and use tools that aren’t always available to the general majority. This doesn’t mean they don’t have occasional large losses; they do. However, it is still a good idea to monitor hedge fund activity. With this in mind, let’s examine smart money sentiment toward ServiceNow Inc (NYSE: NOW) and find out if hedge funds have traded this stock well.
Ay ServiceNow Inc (NYSE: NOW) a bargain? Informed investors are taking a bearish outlook. The number of long hedge fund bets has been cut by 4 in recent months. ServiceNow Inc (NYSE: NOW) had a portfolio of 87 hedge funds at the end of the third quarter of 2021. The all-time high for this statistic was 98. Our calculations also showed that NOW ranked th 28 of the 30 most popular stocks in hedges. funds (click for Q3 rankings). There were 91 hedge funds in our database with NOW positions at the end of the second quarter.
At Insider Monkey, we review multiple sources to find out the next great investment idea. For example, lithium prices have doubled more than last year, so we went through lists like the 10 best EV stocks to pick the next Tesla that will deliver 10x the return. Although we recommend positions in only a small fraction of the companies we review, we look at as many stocks as possible. With all of this in mind, let’s examine the recent hedge fund action covering ServiceNow Inc (NYSE: NOW).
Ole Andreas Halvorsen of Viking Global
Do Hedge Funds Think NOW Is A Good Stock To Buy Now?
At the end of Q3, a total of 87 of the hedge funds monitored by Insider Monkey held this stock, a change of -4% from the second quarter of 2021. The graph below shows the number of hedge funds that has a bullish position in NOW over the last 25 quarters. So, let’s examine which hedge funds are among the top stock holders and which hedge funds are making big strides.
The largest stake in ServiceNow Inc (NYSE: NOW) is held by Tiger Global Management LLC, which reported holding $ 1372.9 million worth of stock at the end of September. It was followed by Lone Pine Capital with a $ 1365.2 million position. Other strong investors in the company include SCGE Management, Citadel Investment Group, and Viking Global. In terms of portfolio weights assigned to each position, Praesidium Investment Management Company allocated the largest weight to ServiceNow Inc (NYSE: NOW), approximately 11.54% of its 13F portfolio. Aravt Global is also relatively strong in the stock, accounting for 8.7 percent of its 13F equity portfolio to date.
Given the fact that ServiceNow Inc (NYSE: NOW) has experienced weak sentiment from hedge fund managers, it’s easy to see that there were some money managers who completely reduced their positions last quarter. Notably, Zach Schreiber’s Point State Capital cut the largest “upper crust” investment of funds tracked by Insider Monkey, valued at close to $ 55.8 million in calling options, and Noam Gottesman’s GLG Partners right behind this step, as the fund was sold for approximately $ 27.5 million worth. These bearish behaviors are interesting, as the hedge fund’s cumulative interest dropped by 4 funds in the past quarter.
Let’s now look at hedge fund activity in other stocks similar to ServiceNow Inc (NYSE: NOW). These stocks are Sanofi (NASDAQ: SNY), American Tower Corporation (NYSE: AMT), Amgen, Inc. (NASDAQ: AMGN), The Toronto-Dominion Bank (NYSE: TD), Intuitive Surgical, Inc. (NASDAQ: ISRG), Snap Inc. (NYSE: SNAP), and Applied Materials, Inc. (NASDAQ: AMAT). This group of stock market valuations is closest to the TODAY market valuation.
| Ticker | Number of HFs with positions | Total Value of HF Positions (x1000) | HF Position Change |
|---|---|---|---|
| SNY | 19 | 1287779 | 3 |
| AMT | 61 | 4474779 | 6 |
| AMGN | 52 | 1448267 | -1 |
| TD | 17 | 294336 | 0 |
| ISRG | 61 | 3536259 | 1 |
| SNAP | 78 | 6739225 | 14 |
| AMAT | 68 | 4320480 | -5 |
| Moderate | 50.9 | 3157304 | 2.6 |
See the table here if you’re experiencing formatting issues.
As you can see these stocks have an average 50.9 hedge fund with bullish positions and the average amount invested in these stocks is $ 3157 million. That number is $ 7528 million in the NOW case. Snap Inc. (NYSE: SNAP) is the most popular stock in this table. On the other hand, Toronto-Dominion Bank (NYSE: TD) is the less popular with only 17 bullish hedge fund positions. Compared to these stocks, ServiceNow Inc (NYSE: NOW) is more popular as hedge funds. Our overall hedge fund sentiment score for NOW is 77.6. Stocks with a higher number of hedge fund positions associated with other stocks as well as associated with their historical range receive higher sentiment marks. Our calculations showed that the top 5 most popular stocks in hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, NOW is not as popular as 5 stocks and this hedge fund betting on NOW has failed because the stock has returned -5.9% since the end of the third quarter (up 1/31) and is not performing well in market. If you are interested in investing in large cap stocks with huge upside potential, you should take a look at the top 5 most popular stocks in hedge funds as all of these stocks have outperformed the market since 2019.
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Baptism: None. This article was originally published in Insider Monkey.