November 28, 2022

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Were Hedge Funds Right About NVIDIA Corporation (NVDA)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about NVIDIA Corporation (NASDAQ:NVDA) in this article.

NVIDIA Corporation (NASDAQ:NVDA) has experienced an increase in activity from the world’s largest hedge funds of late. NVIDIA Corporation (NASDAQ:NVDA) was in 86 hedge funds’ portfolios at the end of June. The all time high for this statistic is 95. There were 80 hedge funds in our database with NVDA holdings at the end of March. Our calculations also showed that NVDA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

best dividend stocks according to Ray Dalio

Ray Dalio of Bridgewater Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s check out the fresh hedge fund action encompassing NVIDIA Corporation (NASDAQ:NVDA).

Do Hedge Funds Think NVDA Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 86 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 92 hedge funds with a bullish position in NVDA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of NVIDIA Corporation (NASDAQ:NVDA), with a stake worth $4238.9 million reported as of the end of June. Trailing Citadel Investment Group was GQG Partners, which amassed a stake valued at $2972 million. Fisher Asset Management, Renaissance Technologies, and D E Shaw 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 Ariose Capital allocated the biggest weight to NVIDIA Corporation (NASDAQ:NVDA), around 19.68% of its 13F portfolio. Panview Capital is also relatively very bullish on the stock, setting aside 10.38 percent of its 13F equity portfolio to NVDA.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Whale Rock Capital Management, managed by Alex Sacerdote, created the largest position in NVIDIA Corporation (NASDAQ:NVDA). Whale Rock Capital Management had $239.2 million invested in the company at the end of the quarter. Philippe Laffont’s Coatue Management also initiated a $163.8 million position during the quarter. The other funds with brand new NVDA positions are Ryan Caldwell’s Chiron Investment Management, John Hurley’s Cavalry Asset Management, and Ray Dalio’s Bridgewater Associates.

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. These stocks are JPMorgan Chase & Co. (NYSE:JPM), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), UnitedHealth Group Inc. (NYSE:UNH), Mastercard Incorporated (NYSE:MA), Bank of America Corporation (NYSE:BAC), and Paypal Holdings Inc (NASDAQ:PYPL). This group of stocks’ market caps resemble NVDA’s market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JPM,108,4928203,-3 JNJ,88,7057087,7 WMT,71,8048192,13 UNH,105,13124871,16 MA,156,17098818,5 BAC,87,46536945,-10 PYPL,143,16352523,0 Average,108.3,16163806,4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 108.3 hedge funds with bullish positions and the average amount invested in these stocks was $16164 million. That figure was $9098 million in NVDA’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 71 bullish hedge fund positions. NVIDIA Corporation (NASDAQ:NVDA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NVDA is 46. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. A small number of hedge funds were also right about betting on NVDA as the stock returned 27.8% since the end of the second quarter (through 10/29) and outperformed the market by an even larger margin.

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