Nvidia’s stock has been soaring, reaching new heights in 2023. But amidst this surge, one of its prominent shareholders, Jennison Associates, has decided to trim its holdings. This bold move by the fund management firm, which holds a significant stake in the chipmaker, has sparked questions among investors.
**Balancing Risk and Optimism**
In an interview with LA News Center, Raj Shant, managing director at Jennison Associates, revealed the firm’s rationale behind selling some of its Nvidia shares. He emphasized the importance of risk management, explaining that the firm’s portfolio had become heavily concentrated in Nvidia due to its rapid appreciation.
“We had a large position in Nvidia,” Shant said. “As the stock rose, it reached nearly 10% of our Global Equity Opportunities strategy. We needed to rebalance our portfolio to maintain diversification.”
Despite the sale, Shant affirmed the firm’s long-term optimism about Nvidia’s prospects. “We remain confident in the company’s fundamentals,” he emphasized. “Our decision to sell is based on risk management, not a change in our positive outlook.”
**The Art of Evaluating Growth Stocks**
Shant shared Jennison Associates’ approach to evaluating and selling growth stocks like Nvidia. “We believe in ‘Buy and Hold Forever,'” he said. “But there are three reasons we might sell a position: to buy more attractive growth stocks, to take profits, or if the company’s fundamentals change.”
He cautioned against making hasty decisions based on short-term market volatility. “We don’t get overly concerned with daily price fluctuations,” Shant explained. “Fundamentals are more critical when considering an investment’s long-term prospects.”
**Indicators to Watch for**
When evaluating the fundamentals of a growth stock, Shant highlighted two factors that could trigger a sell signal for Jennison Associates: insufficient growth and a change in the reason behind an earnings disappointment.
“If we see signs that a company’s growth is slowing down, it may be time to reconsider our position,” Shant said. “Additionally, if an earnings disappointment is caused by demand weakness rather than supply constraints, it’s a cause for concern.”
He cited Nvidia’s involvement in generative AI and obesity drugs as examples of industries with high growth potential. However, he noted that such companies may experience short-term supply challenges, leading to missed expectations. “In these cases, we believe it’s wise for long-term investors to overlook such setbacks,” Shant said.
**Nvidia’s Medium-Term Outlook: A Buy?**
Asked if he would buy Nvidia’s stock today, Shant declined to provide specific financial advice. However, he expressed confidence in the company’s medium-term prospects.
“If you’re willing to invest for the long haul, Nvidia could be a good choice,” Shant said. “Our fund has outperformed the market by a significant margin, with Nvidia remaining our second-largest holding. We believe the company has a solid foundation for continued growth.”
**Institutional Support for Nvidia**
Despite Jennison Associates’ partial sale, other institutional investors have shown confidence in Nvidia. Norges Bank, which manages the world’s largest sovereign wealth fund, invested significantly in the company during the fourth quarter of 2023. Other prominent investors include Morgan Stanley and Barclays, who have also increased their stake in Nvidia recently.
Data sourced from: cnbc.com
