Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Myriad Genetics, Inc. (NASDAQ:MYGN) and see how the stock is affected by the recent hedge fund activity.
Is Myriad Genetics, Inc. (NASDAQ:MYGN) a great investment now? Hedge funds are reducing their bets on the stock. The number of bullish hedge fund positions shrunk by 2 recently. Our calculations also showed that MYGN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to take a peek at the new hedge fund action surrounding Myriad Genetics, Inc. (NASDAQ:MYGN).
Hedge fund activity in Myriad Genetics, Inc. (NASDAQ:MYGN)
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MYGN over the last 17 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 Myriad Genetics, Inc. (NASDAQ:MYGN) was held by Glenview Capital, which reported holding $105.5 million worth of stock at the end of September. It was followed by D E Shaw with a $71.7 million position. Other investors bullish on the company included Camber Capital Management, AQR Capital Management, and GLG Partners. In terms of the portfolio weights assigned to each position Camber Capital Management allocated the biggest weight to Myriad Genetics, Inc. (NASDAQ:MYGN), around 1.51% of its 13F portfolio. Glenview Capital is also relatively very bullish on the stock, earmarking 1.11 percent of its 13F equity portfolio to MYGN.
Seeing as Myriad Genetics, Inc. (NASDAQ:MYGN) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that slashed their positions entirely heading into Q4. Intriguingly, Israel Englander’s Millennium Management dropped the biggest position of the “upper crust” of funds watched by Insider Monkey, worth close to $47.7 million in stock. Ken Grossman and Glen Schneider’s fund, SG Capital Management, also sold off its stock, about $13.9 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Myriad Genetics, Inc. (NASDAQ:MYGN) but similarly valued. We will take a look at Flagstar Bancorp Inc (NYSE:FBC), Deluxe Corporation (NYSE:DLX), Apergy Corporation (NYSE:APY), and The Geo Group, Inc. (NYSE:GEO). This group of stocks’ market valuations are similar to MYGN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $240 million in MYGN’s case. Deluxe Corporation (NYSE:DLX) is the most popular stock in this table. On the other hand Flagstar Bancorp Inc (NYSE:FBC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Myriad Genetics, Inc. (NASDAQ:MYGN) is even less popular than FBC. Hedge funds dodged a bullet by taking a bearish stance towards MYGN. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MYGN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MYGN investors were disappointed as the stock returned -10.1% during the fourth quarter (through the end of November) and underperformed 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.