Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is Novavax, Inc. (NASDAQ:NVAX) the right pick for your portfolio? The best stock pickers are betting on the stock. The number of bullish hedge fund bets went up by 1 lately. Our calculations also showed that NVAX isn’t among the 30 most popular stocks among hedge funds. NVAX was in 13 hedge funds’ portfolios at the end of December. There were 12 hedge funds in our database with NVAX positions at the end of the previous quarter.
To most market participants, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are greater than 8000 funds in operation at present, Our researchers choose to focus on the leaders of this group, about 750 funds. These money managers command the lion’s share of the smart money’s total capital, and by watching their top equity investments, Insider Monkey has found numerous investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s take a glance at the fresh hedge fund action encompassing Novavax, Inc. (NASDAQ:NVAX).
How are hedge funds trading Novavax, Inc. (NASDAQ:NVAX)?
Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in NVAX a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Baker Bros. Advisors held the most valuable stake in Novavax, Inc. (NASDAQ:NVAX), which was worth $8.7 million at the end of the fourth quarter. On the second spot was Great Point Partners which amassed $8.3 million worth of shares. Moreover, Rock Springs Capital Management, Millennium Management, and Two Sigma Advisors were also bullish on Novavax, Inc. (NASDAQ:NVAX), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds were leading the bulls’ herd. Great Point Partners, managed by Jeffrey Jay and David Kroin, initiated the most valuable call position in Novavax, Inc. (NASDAQ:NVAX). Great Point Partners had $8.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $1 million investment in the stock during the quarter. The other funds with brand new NVAX positions are Jim Simons’s Renaissance Technologies and David Lohman’s Diag Capital.
Let’s also examine hedge fund activity in other stocks similar to Novavax, Inc. (NASDAQ:NVAX). These stocks are Lakeland Bancorp, Inc. (NASDAQ:LBAI), Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX), Central European Media Enterprises Ltd. (NASDAQ:CETV), and Stoneridge, Inc. (NYSE:SRI). This group of stocks’ market caps are similar to NVAX’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LBAI,12,59102,0 LXRX,11,10453,1 CETV,5,1243,-2 SRI,15,71331,-3 Average,10.75,35532,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $29 million in NVAX’s case. Stoneridge, Inc. (NYSE:SRI) is the most popular stock in this table. On the other hand Central European Media Enterprises Ltd. (NASDAQ:CETV) is the least popular one with only 5 bullish hedge fund positions. Novavax, Inc. (NASDAQ:NVAX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately NVAX wasn’t nearly as popular as these 15 stock and hedge funds that were betting on NVAX were disappointed as the stock returned -71.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.