Hedge funds and other institutional investors have just completed their 13F filing with the US Securities and Exchange Commission, disclosing the stock portfolio as of the end of June. At Insider Monkey, we track nearly 900 active hedge funds and well-known investors. By analyzing their 13F files, we can determine their common optimistic stocks. One of their choices is ServiceNow Inc (NYSE: NOW), so let’s take a closer look at the sentiment surrounding it in the current quarter.
As of the end of the second quarter of 2021, ServiceNow Inc (NYSE: NOW) is in the portfolio of 91 hedge funds. The historical high of this statistic is 98. Now investors should pay attention to the recent decline in the activity of the world’s largest hedge fund. As of the end of March, there are 98 hedge funds in our database holding NOW assets. Our calculations also show that NOW ranks 24th among the 30 most popular stocks for hedge funds (click to view the second quarter ranking).
So why should we pay attention to the sentiment of hedge funds before making any investment decisions? Our research shows that between 1999 and 2016, the selection of small-cap stocks of hedge funds beat the market at a double-digit annual rate, but the range of outstanding performance has been declining in recent years. Nonetheless, we are still able to identify in advance a group of selected hedge funds that have outperformed the S&P 500 ETF by more than 79 percentage points since March 2017 (see here for details). By tracking the movements of corporate insiders and hedge funds, we have been able to surpass passive index funds. We believe that small investors can benefit a lot from reading hedge fund investor letters and 13F documents.
Andreas Halvorsen of Viking Global
At Insider Monkey, we search multiple sources to find the next great investment idea.For example, lithium mining is currently one of the fastest growing industries, so we are reviewing such stock recommendations Emerging lithium stocksWe went through a list of the 10 best electric car stocks, etc., to pick the next Tesla that can bring a 10x return. Although we only recommend the positions of a small number of companies that we analyze, we will look at as many stocks as possible. We read letters from hedge fund investors and listen to stock recommendations at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Let us now review the key hedge fund actions of ServiceNow Inc (NYSE: NOW).
Do hedge funds now consider good stocks to buy now?
As of the end of June, a total of 91 hedge funds tracked by Insider Monkey were long on this stock, a -7% change from the first quarter of 2020. Below, you can view the changes in hedge fund sentiment to NOW in the past 24 quarters. As hedge fund positions have gone through the usual ebb and flow, some key hedge fund managers are meaningfully increasing their holdings (or have accumulated a large number of positions).
The largest share of ServiceNow Inc (NYSE: NOW) is held by Lone Pine Capital, which reportedly held shares worth US$1.3567 billion at the end of June. It is closely followed by Tiger Global Management LLC, which holds a position of US$1.2124 billion. Other investors who are optimistic about the company include Viking Global, SCGE Management and Citadel Investment Group. In terms of the portfolio weight assigned to each position, Praesidium Investment Management Corporation assigns the largest weight to ServiceNow Inc (NYSE: NOW), accounting for approximately 9.96% of its 13F portfolio. Aravt Global is also relatively optimistic about the stock, selling 8.07% of its 13F stock portfolio to NOW.
As ServiceNow Inc (NYSE:NOW) has witnessed a decline in the sentiment of hedge fund managers, it is easy to see that several fund managers have significantly reduced their holdings in the second quarter. Interestingly, Josh Resnick’s Jericho Capital Asset Management bid farewell to the largest investment of nearly $109.1 million in the 750 funds followed by Insider Monkey. Renaissance Technology is the driving force behind this initiative, and the fund has cut its value by approximately US$55.2 million. These transactions are worth noting because the total interest of hedge funds fell by 7 in the second quarter.
Let’s review the hedge fund activity of other stocks similar to ServiceNow Inc (NYSE: NOW). These stocks are Snap Inc.(NYSE:SNAP), Lockheed Martin Corporation (NYSE:LMT), GlaxoSmithKline plc (NYSE:GSK), S&P Global Inc.(NYSE:SPGI), Stryker Corporation (NYSE:SYK), Micron Technology, Inc. (NASDAQ: MU) and Moderna, Inc. (NASDAQ: MRNA). The market value of this group of stocks matches the market value of NOW.
[table] Ticker, the number of HF holding positions, the total value of HF positions (x1000), the change of HF positions SNAP,64,5399955,-9 LMT,58,1565723,8 GSK,28,1466364,3 SPGI,71,7278360,5 SYK ,48,3369193,2 MU,87,6333058,-13 mRNA,37,5754554,-2 average,56.1,4452458,-0.9 [/table]
If you encounter formatting issues, please view the table here.
As you can see, on average, 56.1 hedge funds have bullish positions in these stocks, and the average amount invested in these stocks is $4.452 billion. In the case of NOW, this figure is $7.011 billion. Micron Technology Corporation (NASDAQ: MU) is the most popular stock in this list. On the other hand, GlaxoSmithKline (NYSE: GSK) is the least popular company with only 28 bullish hedge fund positions. Compared with these stocks, ServiceNow Inc (NYSE: NOW) is more popular among hedge funds. Our overall hedge fund sentiment score for NOW is 75.9. Relative to other stocks and relative to their historical range, stocks with more hedge fund positions get higher sentiment scores. Our calculations show that the top 5 most popular stocks for hedge funds have a return rate of 95.8% in 2019 and 2020, which is 40 percentage points higher than the S&P 500 ETF (SPY). As of September 20, these stocks had a return of 24.1% in 2021, but still outperformed the market by 6.9 percentage points. Hedge funds are also correct to bet on NOW, because the stock has returned 18% since the end of June (to September 20) and outperformed the market by a greater margin. Compared to other stocks with similar market capitalizations, hedge funds are clearly correct in buying this stock.
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Disclosure: None. This article was originally published in Insider Monkey.
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