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Did Hedge Funds Make The Right Call On Global Blood Therapeutics Inc (GBT) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Global Blood Therapeutics Inc (NASDAQ:GBT) based on that data and determine whether they were really smart about the stock.

Global Blood Therapeutics Inc (NASDAQ:GBT) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds’ portfolios at the end of March. At the end of this article we will also compare GBT to other stocks including Hexcel Corporation (NYSE:HXL), Strategic Education Inc (NASDAQ:STRA), and Grocery Outlet Holding Corp. (NASDAQ:GO) to get a better sense of its popularity.

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now we’re going to go over the latest hedge fund action encompassing Global Blood Therapeutics Inc (NASDAQ:GBT).

How have hedgies been trading Global Blood Therapeutics Inc (NASDAQ:GBT)?

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in GBT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is GBT A Good Stock To Buy?

More specifically, Perceptive Advisors was the largest shareholder of Global Blood Therapeutics Inc (NASDAQ:GBT), with a stake worth $309.9 million reported as of the end of September. Trailing Perceptive Advisors was Driehaus Capital, which amassed a stake valued at $19.1 million. D E Shaw, Casdin Capital, and Point72 Asset Management 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 8.07% of its 13F portfolio. Logos Capital is also relatively very bullish on the stock, setting aside 3.61 percent of its 13F equity portfolio to GBT.

Seeing as Global Blood Therapeutics Inc (NASDAQ:GBT) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of hedgies that elected to cut their entire stakes by the end of the first quarter. At the top of the heap, Farallon Capital dumped the largest stake of all the hedgies monitored by Insider Monkey, worth close to $59.6 million in stock, and Stephen DuBois’s Camber Capital Management was right behind this move, as the fund said goodbye to about $58 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Global Blood Therapeutics Inc (NASDAQ:GBT) but similarly valued. These stocks are Hexcel Corporation (NYSE:HXL), Strategic Education Inc (NASDAQ:STRA), Grocery Outlet Holding Corp. (NASDAQ:GO), and SiteOne Landscape Supply, Inc. (NYSE:SITE). This group of stocks’ market valuations are similar to GBT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HXL 27 187145 -3
STRA 13 228871 0
GO 17 102998 3
SITE 19 86260 4
Average 19 151319 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $431 million in GBT’s case. Hexcel Corporation (NYSE:HXL) is the most popular stock in this table. On the other hand Strategic Education Inc (NASDAQ:STRA) is the least popular one with only 13 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on GBT, though not to the same extent, as the stock returned 23.6% during the second quarter and outperformed the market as well.

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