2019 Review: Most Favored Hedge Fund Stocks vs. Gilead Sciences, Inc. (GILD)

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Gilead Sciences, Inc. (NASDAQ:GILD) and compare its performance against hedge funds’ favorite stocks.

Gilead Sciences, Inc. (NASDAQ:GILD) was in 58 hedge funds’ portfolios at the end of the third quarter of 2019. GILD has seen an increase in hedge fund interest recently. There were 57 hedge funds in our database with GILD holdings at the end of the previous quarter. Our calculations also showed that GILD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now we’re going to view the fresh hedge fund action encompassing Gilead Sciences, Inc. (NASDAQ:GILD).

Hedge fund activity in Gilead Sciences, Inc. (NASDAQ:GILD)

Heading into the fourth quarter of 2019, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the second quarter of 2019. On the other hand, there were a total of 56 hedge funds with a bullish position in GILD a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Gilead Sciences, Inc. (NASDAQ:GILD) was held by Renaissance Technologies, which reported holding $933.9 million worth of stock at the end of September. It was followed by D E Shaw with a $349.9 million position. Other investors bullish on the company included Two Sigma Advisors, AQR Capital Management, and GLG Partners. In terms of the portfolio weights assigned to each position Copernicus Capital Management allocated the biggest weight to Gilead Sciences, Inc. (NASDAQ:GILD), around 11.67% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, earmarking 8.01 percent of its 13F equity portfolio to GILD.

As aggregate interest increased, key hedge funds were breaking ground themselves. Perella Weinberg Partners, assembled the most outsized position in Gilead Sciences, Inc. (NASDAQ:GILD). Perella Weinberg Partners had $3.2 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $3 million position during the quarter. The following funds were also among the new GILD investors: Jeffrey Talpins’s Element Capital Management, Lee Ainslie’s Maverick Capital, and Minhua Zhang’s Weld Capital Management.

Let’s now review hedge fund activity in other stocks similar to Gilead Sciences, Inc. (NASDAQ:GILD). These stocks are Mondelez International Inc (NASDAQ:MDLZ), General Electric Company (NYSE:GE), Altria Group Inc (NYSE:MO), and CME Group Inc (NASDAQ:CME). All of these stocks’ market caps resemble GILD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MDLZ 52 2813252 5
GE 51 4455114 -5
MO 47 1364557 9
CME 46 2245287 7
Average 49 2719553 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $2720 million. That figure was $3263 million in GILD’s case. Mondelez International Inc (NASDAQ:MDLZ) is the most popular stock in this table. On the other hand CME Group Inc (NASDAQ:CME) is the least popular one with only 46 bullish hedge fund positions. Compared to these stocks Gilead Sciences, Inc. (NASDAQ:GILD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately GILD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GILD were disappointed as the stock returned 10.8% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.