Did Hedge Funds Drop The Ball On Global Blood Therapeutics Inc (GBT)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Global Blood Therapeutics Inc (NASDAQ:GBT).

Is Global Blood Therapeutics Inc (NASDAQ:GBT) going to take off soon? Investors who are in the know are reducing their bets on the stock. The number of long hedge fund bets were cut by 6 in recent months. Our calculations also showed that GBT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GBT was in 24 hedge funds’ portfolios at the end of September. There were 30 hedge funds in our database with GBT positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Steven Cohen of Point72 Asset Management

Steven Cohen of Point72 Asset Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the new hedge fund action surrounding Global Blood Therapeutics Inc (NASDAQ:GBT).

Hedge fund activity in Global Blood Therapeutics Inc (NASDAQ:GBT)

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GBT over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

No of Hedge Funds with GBT Positions

Among these funds, Perceptive Advisors held the most valuable stake in Global Blood Therapeutics Inc (NASDAQ:GBT), which was worth $285.1 million at the end of the third quarter. On the second spot was Farallon Capital which amassed $78.2 million worth of shares. venBio Select Advisor, Point72 Asset Management, and Casdin Capital 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 Perceptive Advisors allocated the biggest weight to Global Blood Therapeutics Inc (NASDAQ:GBT), around 7.68% of its portfolio. venBio Select Advisor is also relatively very bullish on the stock, earmarking 2.02 percent of its 13F equity portfolio to GBT.

Because Global Blood Therapeutics Inc (NASDAQ:GBT) has witnessed a decline in interest from the smart money, logic holds that there were a few hedge funds who sold off their entire stakes by the end of the third quarter. It’s worth mentioning that Jonathan Barrett and Paul Segal’s Luminus Management cut the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $20.4 million in stock. Ken Greenberg and David Kim’s fund, Ghost Tree Capital, also dumped its stock, about $15.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 6 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Global Blood Therapeutics Inc (NASDAQ:GBT). We will take a look at International Game Technology PLC (NYSE:IGT), TC Pipelines, LP (NYSE:TCP), Advanced Disposal Services, Inc. (NYSE:ADSW), and Magnolia Oil & Gas Corporation (NYSE:MGY). This group of stocks’ market caps match GBT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IGT 27 234121 -3
TCP 5 17286 0
ADSW 24 668160 -2
MGY 17 132628 -2
Average 18.25 263049 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $263 million. That figure was $543 million in GBT’s case. International Game Technology PLC (NYSE:IGT) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 5 bullish hedge fund positions. Global Blood Therapeutics Inc (NASDAQ:GBT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on GBT as the stock returned 37.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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