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Did Hedge Funds Drop The Ball On Globus Medical Inc (GMED) ?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Globus Medical Inc (NYSE:GMED) from the perspective of those elite funds.

Globus Medical Inc (NYSE:GMED) investors should be aware of a decrease in hedge fund sentiment of late. Our calculations also showed that GMED isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GMED_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the recent hedge fund action surrounding Globus Medical Inc (NYSE:GMED).

What does smart money think about Globus Medical Inc (NYSE:GMED)?

At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in GMED 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.

Michael Castor Sio Capital

Among these funds, AQR Capital Management held the most valuable stake in Globus Medical Inc (NYSE:GMED), which was worth $84.4 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $53.5 million worth of shares. Moreover, GLG Partners, Marshall Wace LLP, and Sio Capital were also bullish on Globus Medical Inc (NYSE:GMED), allocating a large percentage of their portfolios to this stock.

Due to the fact that Globus Medical Inc (NYSE:GMED) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few money managers that elected to cut their full holdings by the end of the second quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, totaling an estimated $24 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $4.8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 5 funds by the end of the second quarter.

Let’s also examine hedge fund activity in other stocks similar to Globus Medical Inc (NYSE:GMED). We will take a look at MSA Safety Incorporated (NYSE:MSA), Copa Holdings, S.A. (NYSE:CPA), Penske Automotive Group, Inc. (NYSE:PAG), and Plains GP Holdings LP (NYSE:PAGP). This group of stocks’ market caps are similar to GMED’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MSA 14 79129 -3
CPA 16 277754 2
PAG 17 61220 -1
PAGP 17 307082 1
Average 16 181296 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $171 million in GMED’s case. Penske Automotive Group, Inc. (NYSE:PAG) is the most popular stock in this table. On the other hand MSA Safety Incorporated (NYSE:MSA) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Globus Medical Inc (NYSE:GMED) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on GMED as the stock returned 20.9% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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