We recently published a list of Renaissance Technologies Portfolio: 10 Best Stocks To Buy. In this article, we are going to take a look at where Novo Nordisk A/S (NYSE:NVO) stands against the other best stocks to buy which are part of the Renaissance Technologies portfolio.
Renaissance Technologies is an American hedge fund that specializes in systematic trading and employs statistical and mathematical tools to drive its investment programs. As of March 2024, the fund managed discretionary assets over $89 billion, according to their Form ADV. It was founded in 1982 by Jim Simons, a mathematician who worked as a code breaker for the US National Security Agency during the Cold War.
Simons is considered among the pioneers of quantitative investing. At the time of his death in May 2024, he had an estimated net worth of $31.4 billion, making him the 51st richest person in the world. His use of mathematical models and algorithms to drive long-term investment returns earned him a legacy that rivaled the likes of Warren Buffet and George Soros.
His signature Medallion generated average annual returns of 66% for three decades between 1988 and 2018, earning more than $100 billion in profits during the period. The fund started with charging a 5% fixed fee and also had performance charges of 20%, which were later increased to 44% in 2002. Despite those cuts, Medallion earned annual returns of around 39% on average.
The fund was closed to outside investors in 1993 and has since then only been available to past and current employees, and their families. Renaissance Technologies does have other funds that are open to outsiders, such as Renaissance Institutional Equities Fund (RIEF) and Renaissance Institutional Diversified Alpha (RIDA).
Simons stepped down from active management of Renaissance Technologies in 2010 and resigned as its executive chairman in 2021. Peter Brown is the current CEO of the capital market company. He graduated with a B.A. in Mathematics from Harvard University and also holds a Ph.D. in Computer Science from Carnegie Mellon University. Brown’s father, Henry B.R. Brown, invented the Reserve Primary Fund in 1970, which was the first money market fund to be set up.
Brown is committed to the use of mathematical models to discover and unlock the value of stocks in the market. However, Renaissance hedge funds that are open to outside investors have been shrinking for some while. According to a recent report in the Financial Times, RIEF currently manages around $19.6 billion, significantly down from $35.8 billion in 2020. The collapse of RIDA and Renaissance Institutional Diversified Global Equities (RIDGE) has been even worse. The two funds were merged this year. In 2019, RIDA managed about $15 billion, while RIDGE had a portfolio of $14.3 billion. Today, the combined fund manages only $3.6 billion.
As a result, Renaissance’s external assets under management have declined from $65.1 billion in 2019 to $23.2 billion today. Much of the exodus happened following the coronavirus pandemic and was driven by a shock performance by the hedge fund as the stock market rattled. In contrast, the Medallion Fund, which is limited to past and current employees, gained 76% in 2020 despite Covid-19. This is because the fund indulges in high-frequency trading with a lower capacity, a strategy that is strikingly different from those applied for external funds.
However, the performance of external funds is beginning to stabilize after the lows over the last few years. RIEF is up 19.8% this year, while RIDA has also gained 17.4%. Though financial experts believe the improvement is owed more to the fund’s performance, rather than flows.
Methodology
We scanned Renaissance Technologies’ 13F portfolio, as of June 30, 2024 and picked the top 10 stocks according to their stake value. The figures were sourced from Insider Monkey Database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An elderly couple receiving insulin from a pharmacist, representing healthcare company’s successful pharmaceutical products.
Novo Nordisk A/S (NYSE:NVO)
Stake Value as of Q2 2024: $1,308,265,485
Novo Nordisk A/S (NYSE:NVO) is a global healthcare company, headquartered in Bagsværd near Copenhagen, Denmark. It specializes in the treatment of obesity, diabetes, and other rare diseases. The company markets its products in over 168 countries and employs 48,000 employees around the world. Its medicines, most notably Ozempic, Rybelsus, and Wegovy have helped improve lives of diabetes and obesity patients worldwide.
The company has had an impressive start to the year, reporting a significant 25% increase in its sales and 19% growth in operating profits during the first half of 2024, driven by a 32% surge in GLP-1 sales in diabetes. Insulin sales also expanded 10%, fueled by substantial demand in North America. Sales growth of Novo Nordisk A/S (NYSE:NVO)’s diabetes care products stood at 25%, which was faster than the global diabetes market. It now enjoys a 34.1% share of the global diabetes value market.
GLP-1 continues to lead the weight loss drug market with a value market share of 69%. Novo Nordisk’s Ozempic leads the way with a 46.6% market share. The brand has contributed a 64% increase in the company’s trailing 12-month revenue. Long-term prospects for Ozempic also remain strong with the market for obesity-fighting drugs set to surpass the $100 billion mark by 2030, according to Goldman Sachs.
The company is optimistic about the launch of Wegovy in international markets and expects it to drive sales during the second half of 2024. The drug is used for weight loss in patients who are overweight or obese and are also suffering from other health conditions like hypertension, diabetes, and high cholesterol. Wegovy was approved for use in China in June this year, which has bolstered the bullish sentiment around the stock.
Looking ahead, Novo Nordisk A/S (NYSE:NVO) does expect drug shortages and supply chain constraints to impact product availability across different parts of the world, but the overall outlook for the company is positive. There is consensus among Wall Street analysts on the stock’s Strong Buy rating with a share price upside potential of 21.65%.
According to Insider Monkey’s database for Q2 2024, 67 hedge funds had investments in the company, up from 60 during the first quarter. Novo Nordisk is the best stock to buy from the Renaissance Technologies portfolio, with the hedge fund having a stake of over $1.3 billion in the company, which represents 2.21% of its portfolio.
Overall, NVO ranks 1st among the Renaissance Technologies Portfolio: 10 Best Stocks To Buy. While we acknowledge the potential of NVO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.