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 NortonLifeLock Inc. (NASDAQ:NLOK) in this article.
Is NLOK stock a buy? NortonLifeLock Inc. (NASDAQ:NLOK) was in 29 hedge funds' portfolios at the end of December. The all time high for this statistic is 46. NLOK investors should pay attention to a decrease in enthusiasm from smart money of late. There were 34 hedge funds in our database with NLOK positions at the end of the third quarter. Our calculations also showed that NLOK isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Jeffrey Smith of Starboard Value LP
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let's view the new hedge fund action encompassing NortonLifeLock Inc. (NASDAQ:NLOK).
Do Hedge Funds Think NLOK Is A Good Stock To Buy Now?
At the end of December, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the previous quarter. By comparison, 46 hedge funds held shares or bullish call options in NLOK a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Starboard Value LP held the most valuable stake in NortonLifeLock Inc. (NASDAQ:NLOK), which was worth $432.9 million at the end of the fourth quarter. On the second spot was Park West Asset Management which amassed $78.9 million worth of shares. Soros Fund Management, Renaissance Technologies, and AQR Capital Management 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 59 North Capital allocated the biggest weight to NortonLifeLock Inc. (NASDAQ:NLOK), around 12.93% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, earmarking 12.24 percent of its 13F equity portfolio to NLOK.
Judging by the fact that NortonLifeLock Inc. (NASDAQ:NLOK) has witnessed falling interest from hedge fund managers, it's safe to say that there was a specific group of funds who sold off their full holdings by the end of the fourth quarter. Intriguingly, Stephen J. Errico's Locust Wood Capital Advisers dumped the biggest investment of the 750 funds followed by Insider Monkey, totaling close to $44.8 million in stock. Len Kipp and Xavier Majic's fund, Maple Rock Capital, also cut its stock, about $23.3 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 5 funds by the end of the fourth quarter.
Let's also examine hedge fund activity in other stocks similar to NortonLifeLock Inc. (NASDAQ:NLOK). These stocks are Bio-Techne Corporation (NASDAQ:TECH), Dynatrace, Inc. (NYSE:DT), The Boston Beer Company Inc (NYSE:SAM), Wynn Resorts, Limited (NASDAQ:WYNN), Graco Inc. (NYSE:GGG), Qiagen NV (NYSE:QGEN), and Atmos Energy Corporation (NYSE:ATO). This group of stocks' market valuations are closest to NLOK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TECH,24,301777,-6 DT,53,2023929,7 SAM,35,1143708,-1 WYNN,52,1104483,9 GGG,25,269383,-5 QGEN,24,670099,-5 ATO,25,274618,7 Average,34,826857,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $827 million. That figure was $1001 million in NLOK's case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand Bio-Techne Corporation (NASDAQ:TECH) is the least popular one with only 24 bullish hedge fund positions. NortonLifeLock Inc. (NASDAQ:NLOK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NLOK is 27.5. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and surpassed the market again by 1.5 percentage points. Unfortunately NLOK wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); NLOK investors were disappointed as the stock returned 7.5% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.