Hedge Funds Are Coming Back To Nutanix, Inc. (NTNX)

·6 min read

In this article we will check out the progression of hedge fund sentiment towards Nutanix, Inc. (NASDAQ:NTNX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Nutanix, Inc. (NASDAQ:NTNX) an excellent investment now? The smart money was becoming more confident. The number of long hedge fund bets advanced by 5 recently. Nutanix, Inc. (NASDAQ:NTNX) was in 29 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 39. Our calculations also showed that NTNX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 24 hedge funds in our database with NTNX holdings at the end of December.

Today there are several metrics market participants put to use to analyze stocks. Some of the best metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outperform their index-focused peers by a very impressive margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

David Blood
David Blood

David Blood of Generation Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks 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. With all of this in mind we're going to view the fresh hedge fund action encompassing Nutanix, Inc. (NASDAQ:NTNX).

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

At Q1's end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the fourth quarter of 2020. On the other hand, there were a total of 29 hedge funds with a bullish position in NTNX a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is NTNX A Good Stock To Buy?
Is NTNX A Good Stock To Buy?

Of the funds tracked by Insider Monkey, David Blood and Al Gore's Generation Investment Management has the number one position in Nutanix, Inc. (NASDAQ:NTNX), worth close to $498.5 million, corresponding to 2.1% of its total 13F portfolio. The second most bullish fund manager is Crosslink Capital, managed by Seymour Sy Kaufman and Michael Stark, which holds a $57.2 million position; 10.3% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions consist of Gavin Baker's Atreides Management, Mendel Hui's Isomer Partners and Michael Rockefeller and KarláKroeker's Woodline Partners. In terms of the portfolio weights assigned to each position Crosslink Capital allocated the biggest weight to Nutanix, Inc. (NASDAQ:NTNX), around 10.32% of its 13F portfolio. Isomer Partners is also relatively very bullish on the stock, designating 8.63 percent of its 13F equity portfolio to NTNX.

As industrywide interest jumped, some big names were leading the bulls' herd. Atreides Management, managed by Gavin Baker, established the most outsized position in Nutanix, Inc. (NASDAQ:NTNX). Atreides Management had $40.6 million invested in the company at the end of the quarter. Renaissance Technologies also made a $14.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Eric Singer's VIEX Capital Advisors, and Matthew Hulsizer's PEAK6 Capital Management.

Let's now review hedge fund activity in other stocks similar to Nutanix, Inc. (NASDAQ:NTNX). These stocks are Enel Chile S.A. (NYSE:ENIC), Quidel Corporation (NASDAQ:QDEL), J2 Global Inc (NASDAQ:JCOM), KBR, Inc. (NYSE:KBR), Perrigo Co Plc (NASDAQ:PRGO), Ashland Global Holdings Inc.. (NYSE:ASH), and Owl Rock Capital Corporation (NYSE:ORCC). This group of stocks' market values are similar to NTNX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ENIC,7,21756,0 QDEL,28,218255,-1 JCOM,22,331056,-2 KBR,31,1045871,2 PRGO,33,397635,2 ASH,36,1199148,-2 ORCC,20,309298,0 Average,25.3,503288,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $503 million. That figure was $814 million in NTNX's case. Ashland Global Holdings Inc.. (NYSE:ASH) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 7 bullish hedge fund positions. Nutanix, Inc. (NASDAQ:NTNX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NTNX is 70.2. 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 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on NTNX as the stock returned 44.7% since the end of Q1 (through 7/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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