Did Hedge Funds Make The Right Call On Quidel Corporation (QDEL) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Quidel Corporation (NASDAQ:QDEL) and determine whether hedge funds had an edge regarding this stock.

Quidel Corporation (NASDAQ:QDEL) investors should be aware of an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that QDEL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

Andrew Sandler of Sandler Capital Management

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 let’s view the key hedge fund action surrounding Quidel Corporation (NASDAQ:QDEL).

How have hedgies been trading Quidel Corporation (NASDAQ:QDEL)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards QDEL over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Quidel Corporation (NASDAQ:QDEL) was held by GAMCO Investors, which reported holding $42.2 million worth of stock at the end of September. It was followed by D E Shaw with a $21.4 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Sandler Capital Management. In terms of the portfolio weights assigned to each position Birchview Capital allocated the biggest weight to Quidel Corporation (NASDAQ:QDEL), around 4.24% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, setting aside 3.51 percent of its 13F equity portfolio to QDEL.

As one would reasonably expect, some big names have jumped into Quidel Corporation (NASDAQ:QDEL) headfirst. Sandler Capital Management, managed by Andrew Sandler, assembled the largest position in Quidel Corporation (NASDAQ:QDEL). Sandler Capital Management had $5.2 million invested in the company at the end of the quarter. Efrem Kamen’s Pura Vida Investments also initiated a $5.1 million position during the quarter. The other funds with brand new QDEL positions are George McCabe’s Portolan Capital Management, Adam Usdan’s Trellus Management Company, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks similar to Quidel Corporation (NASDAQ:QDEL). These stocks are Axalta Coating Systems Ltd (NYSE:AXTA), Eastgroup Properties Inc (NYSE:EGP), Solaredge Technologies Inc (NASDAQ:SEDG), and LogMeIn Inc (NASDAQ:LOGM). This group of stocks’ market values match QDEL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AXTA 49 1105920 -11
EGP 13 36375 3
SEDG 27 264038 -1
LOGM 28 759486 -3
Average 29.25 541455 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $541 million. That figure was $126 million in QDEL’s case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 13 bullish hedge fund positions. Quidel Corporation (NASDAQ:QDEL) is not the least popular stock in this group but hedge fund interest is still below 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 and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on QDEL as the stock returned 128.7% during the second quarter and outperformed the market by an even larger margin.

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