Here is What Hedge Funds Think About Dr. Reddy’s Laboratories Limited (ADR) (RDY)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY).

Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY) investors should pay attention to a slight increase in enthusiasm from smart money in recent months. RDY was in 14 hedge funds’ portfolios at the end of the third quarter of 2015. There were 13 hedge funds in our database with RDY positions at the end of the previous quarter. At the end of this article we will also compare RDY to other stocks, including ServiceNow Inc (NYSE:NOW), Signet Jewelers Ltd. (NYSE:SIG), and Continental Resources, Inc. (NYSE:CLR) to get a better sense of its popularity.

In the eyes of most market participants, hedge funds are seen as worthless, old investment tools of yesteryear. While there are more than 8000 funds trading today, Our experts choose to focus on the top tier of this group, around 700 funds. These money managers direct most of the hedge fund industry’s total asset base, and by keeping track of their best equity investments, Insider Monkey has figured out a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, let’s take a look at the key action encompassing Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY).

How are hedge funds trading Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY)?

At the Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the biggest position in Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY), worth close to $317.1 million, amounting to 0.7% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which holds a $163.8 million position; 0.3% of its 13F portfolio is allocated to the company. Some other peers that hold long positions contain Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management and D. E. Shaw’s D E Shaw.

Consequently, specific money managers were breaking ground themselves. Lee Munder Capital Group, managed by Lee Munder, assembled the biggest position in Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY). Lee Munder Capital Group had $8.1 million invested in the company at the end of the quarter. Robert B. Gillam’s McKinley Capital Management also initiated a $1.4 million position during the quarter. The only other fund with a brand new RDY position is Thomas Bailard’s Bailard Inc.

Let’s now take a look at hedge fund activity in other stocks similar to Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY). We will take a look at ServiceNow Inc (NYSE:NOW), Signet Jewelers Ltd. (NYSE:SIG), Continental Resources, Inc. (NYSE:CLR), and Rockwell Collins, Inc. (NYSE:COL). This group of stocks’ market values match RDY’s market value.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1.10 billion, compared to $538 million in RDY’s case. Signet Jewelers Ltd. (NYSE:SIG) is the most popular stock in this table, while Rockwell Collins, Inc. (NYSE:COL) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY) is even less popular than COL. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.