Hedge Funds Are Nibbling On Nikola Corporation (NKLA)
As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Nikola Corporation ((NASDAQ:NKLA)).
Nikola Corporation ((NASDAQ:NKLA)) was in 19 hedge funds’ portfolios at the end of March. The all time high for this statistic is 29. NKLA investors should pay attention to an increase in hedge fund interest in recent months. There were 18 hedge funds in our database with NKLA holdings at the end of December. Our calculations also showed that NKLA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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Philippe Laffont of Coatue Management
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Do Hedge Funds Think NKLA Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the fourth quarter of 2020. By comparison, 13 hedge funds held shares or bullish call options in NKLA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Inclusive Capital was the largest shareholder of Nikola Corporation ((NASDAQ:NKLA)), with a stake worth $142.7 million reported as of the end of March. Trailing Inclusive Capital was Coatue Management, which amassed a stake valued at $134.2 million. Citadel Investment Group, Millennium Management, and Citadel Investment Group 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 Inclusive Capital allocated the biggest weight to Nikola Corporation ((NASDAQ:NKLA)), around 10.61% of its 13F portfolio. Coatue Management is also relatively very bullish on the stock, designating 0.74 percent of its 13F equity portfolio to NKLA.
Now, specific money managers have jumped into Nikola Corporation ((NASDAQ:NKLA)) headfirst. Holocene Advisors, managed by Brandon Haley, assembled the most valuable position in Nikola Corporation ((NASDAQ:NKLA)). Holocene Advisors had $6 million invested in the company at the end of the quarter. David Greenspan’s Slate Path Capital also initiated a $4.7 million position during the quarter. The following funds were also among the new NKLA investors: D. E. Shaw’s D E Shaw, David Costen Haley’s HBK Investments, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s go over hedge fund activity in other stocks similar to Nikola Corporation ((NASDAQ:NKLA)). These stocks are Intellia Therapeutics, Inc. (NASDAQ:NTLA), Manpowergroup Inc (NYSE:MAN), Crocs, Inc. (NASDAQ:CROX), Nutanix, Inc. (NASDAQ:NTNX), Enel Chile S.A. (NYSE:ENIC), Quidel Corporation (NASDAQ:QDEL), and J2 Global Inc (NASDAQ:JCOM). All of these stocks’ market caps are closest to NKLA’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTLA,29,1139388,-1 MAN,26,263197,-5 CROX,31,699853,-10 NTNX,29,814063,5 ENIC,7,21756,0 QDEL,28,218255,-1 JCOM,22,331056,-2 Average,24.6,498224,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $498 million. That figure was $337 million in NKLA’s case. Crocs, Inc. (NASDAQ:CROX) 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. Nikola Corporation ((NASDAQ:NKLA)) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NKLA is 50.7. 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 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately NKLA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NKLA investors were disappointed as the stock returned 0.5% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Disclosure: None. This article was originally published at Insider Monkey.