In this article, we will examine whether hedge funds think ServiceNow Inc (NYSE:NOW) is currently a good investment. Before studying for a few hours, we will examine the sentiment of hedge funds and billionaire investors. Hedge funds spent millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and got tips from investment bankers and industry insiders. Of course, they sometimes fail miserably, but after adjusting for known risk factors, their consensus stock picking has always performed better than the market.
By the end of the second quarter of 2020, ServiceNow Inc (NYSE:NOW) has entered 86 hedge fund portfolios. The highest historical value of this data is 92. NOW shareholders have recently witnessed an increase in interest in hedge funds. At the end of the first quarter, there were 85 hedge funds in our database, and they are now in positions. Our calculations also show that NOW is not among the 30 most popular stocks in hedge funds (click the Q2 ranking and view the video to get a quick overview of the top 5 stocks). Video: Watch our video to learn about the 5 most popular hedge fund stocks.
In the financial world, investors can use a large number of tools to rate stocks. Hedge funds and insider trading indicators are the least popular tools. We have proven that, historically, those who follow the best fund managers’ preferences can outperform the broad index as a whole. Since March 2017, Insider Monkey’s monthly stock selection rate has rebounded by 101%, outperforming the S&P 500 ETF by more than 56 percentage points. Our short strategy outperforms the S&P 500 short ETF by 20 percentage points each year (see details here). Therefore, we believe that hedge fund sentiment is a useful indicator that investors should pay attention to.
Rajiv Jain of GQG Partners
At Insider Monkey, we search multiple resources to find the next great investment idea. Hedge fund sentiment against Tesla reached a record high at the end of 2019, and Tesla’s stock price has more than quadrupled this year.We are trying to identify the winners of other electric car revolutions, so we are checking this Lithium inventory under the radar.We browse 10 lists The most profitable company Choose the best large stocks in the world to buy. Even though we only recommend offering positions in a small part of the companies analyzed, we will check as many stocks as possible. We read letters from hedge fund investors and listen to stock quotes at hedge fund meetings. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keep this in mind and we will discuss the latest hedge fund actions including ServiceNow Inc (NYSE:NOW).
How does smart money think about ServiceNow Inc (NYSE:NOW)?
Entering the third quarter of 2020, a total of 86 hedge funds tracked by Insider Monkey are bullish on the stock, a change of 1% from the quarter quarter. The chart below shows the number of hedge funds with active NOW positions in the past 20 quarters. So let’s check which hedge funds are the largest holders of the stock and which hedge funds are making big moves.
More specifically, Lone Pine Capital is the largest shareholder of ServiceNow Inc (NYSE: NOW). As of the end of September, the company’s shares were valued at $724.7 million. Lone Pine Capital is closely followed by Melvin Capital Management, which has accumulated $340.8 million worth of shares. SCGE Management, Tiger Global Management LLC and GQG Partners also like the stock very much, becoming one of the company’s largest hedge fund holders. In terms of the portfolio weight assigned to each position, Praesidium Investment Management Company assigns the largest weight to ServiceNow Inc (NYSE: NOW), which accounts for approximately 12.05% of its 13F portfolio. Center Lake Capital is also relatively optimistic about the stock and allocated 10.71% of its 13F stock portfolio to NOW.
As the interest of the entire industry is advancing by leaps and bounds, major money managers are developing their own businesses. Tiger Eye Capital, managed by Ben Gambill, created the largest position in ServiceNow Inc (NYSE: NOW). As of the end of the quarter, Tiger Eye Capital has invested US$20.2 million in the company. Joe DiMenna’s ZWEIG DIMENNA PARTNERS also opened a position of $15.9 million during the quarter. Other funds with new NOW positions include McKinley Capital Management, Blair Baker’s Precept Capital Management, and Larry Chen and Terry Zhang’s Tairen Capital.
Let’s examine the hedge fund activity in other stocks-not necessarily in the same industry as ServiceNow Inc (NYSE:NOW), but with similar valuations. We will look at American Express (NYSE: AXP), Morgan Stanley (NYSE: MS), Apex Pharmaceutical Co., Ltd. (NASDAQ: VRTX), Coca-Cola FEMSA, SAB de CV (NYSE: KOF), Mondelez International Inc (NASDAQ: MDLZ), Altria Group Corporation (NYSE: MO) and Zoom Video Communications, Inc. (NASDAQ: ZM). The market value of this group of stocks matches the market value of NOW.
[table] Stock code, number of HF with position, total value of HF position (x1000), change of HF position AXP, 54,17635296, -3 MS, 61,4357171, -9 VRTX, 54,3477688, -2 KOF, 5, 358015, -2 MDLZ, 54,2594722,0 MO, 43,1289543, -3 ZM, 48,6758811,1 average, 45.6,5210178, -2.6 [/table]
If you encounter formatting issues, please view the table here.
As you can see, these stocks have an average of 45.6 hedge funds with bullish positions and an average investment of US$5.210 billion. In the case of NOW, this figure is $4.95 billion. Morgan Stanley (NYSE: MS) is the most popular stock in this list. On the other hand, Coca-Cola FEMSA, SAB de CV (NYSE: KOF) have only 5 most popular hedge fund positions. Compared with these stocks, ServiceNow Inc (NYSE:NOW) is more popular among hedge funds. We now have an overall sentiment score of 84 for hedge funds. Compared with other stocks, hedge funds have higher positions and higher sentiment scores relative to stocks with higher historical ranges. Our calculation results show that the top ten stocks in hedge funds returned 41.4% in 2019, outperforming the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 29.2% between 2020 and October 16, but still managed to beat the market by 19.7 percentage points. Hedge funds are also betting on now, because since the end of June (as of 10/16), the stock has returned 29.6% and leads the market by a greater margin. Hedge funds are clearly correct compared to other stocks with similar market capitalization.
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Disclosure: None. This article was originally published in Insider Monkey.
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