Hedge Funds Are Getting Out Of GW Pharmaceuticals plc (GWPH)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards GW Pharmaceuticals plc (NASDAQ:GWPH) at the end of the second quarter and determine whether the smart money was really smart about this stock.

GW Pharmaceuticals plc (NASDAQ:GWPH) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. GW Pharmaceuticals plc (NASDAQ:GWPH) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 32. Our calculations also showed that GWPH isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Today there are numerous metrics investors can use to grade publicly traded companies. A duo of the best metrics are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the top money managers can outpace the market by a solid amount (see the details here).

Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a glance at the latest hedge fund action surrounding GW Pharmaceuticals plc (NASDAQ:GWPH).

Hedge fund activity in GW Pharmaceuticals plc (NASDAQ:GWPH)

At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in GWPH a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in GW Pharmaceuticals plc (NASDAQ:GWPH), which was worth $103.5 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $63.2 million worth of shares. Great Point Partners, Baker Bros. Advisors, and Rock Springs Capital 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 Great Point Partners allocated the biggest weight to GW Pharmaceuticals plc (NASDAQ:GWPH), around 4.41% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, designating 4.14 percent of its 13F equity portfolio to GWPH.

Due to the fact that GW Pharmaceuticals plc (NASDAQ:GWPH) has experienced declining sentiment from the smart money, it’s easy to see that there were a few funds who sold off their positions entirely in the second quarter. It’s worth mentioning that Brandon Haley’s Holocene Advisors dumped the largest position of all the hedgies monitored by Insider Monkey, worth an estimated $18.1 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $4.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds in the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as GW Pharmaceuticals plc (NASDAQ:GWPH) but similarly valued. We will take a look at National Fuel Gas Company (NYSE:NFG), Hutchison China MediTech Limited (NASDAQ:HCM), Southwest Gas Holdings, Inc. (NYSE:SWX), Houlihan Lokey Inc (NYSE:HLI), Brixmor Property Group Inc (NYSE:BRX), Acuity Brands, Inc. (NYSE:AYI), and TopBuild Corp (NYSE:BLD). This group of stocks’ market valuations are closest to GWPH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NFG 22 174710 4
HCM 7 34538 1
SWX 13 83518 0
HLI 24 146572 9
BRX 24 82889 -4
AYI 38 650114 7
BLD 30 141163 10
Average 22.6 187643 3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $351 million in GWPH’s case. Acuity Brands, Inc. (NYSE:AYI) is the most popular stock in this table. On the other hand Hutchison China MediTech Limited (NASDAQ:HCM) is the least popular one with only 7 bullish hedge fund positions. GW Pharmaceuticals plc (NASDAQ:GWPH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GWPH is 36.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately GWPH wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GWPH investors were disappointed as the stock returned -20.7% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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