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Hedge Funds Are Selling Globus Medical Inc (GMED)

In this article we will take a look at whether hedge funds think Globus Medical Inc (NYSE:GMED) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Globus Medical Inc (NYSE:GMED) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. GMED was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with GMED positions at the end of the previous quarter. Our calculations also showed that GMED 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.

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.

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the fresh hedge fund action encompassing Globus Medical Inc (NYSE:GMED).

How are hedge funds trading Globus Medical Inc (NYSE:GMED)?

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -34% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GMED over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the number one position in Globus Medical Inc (NYSE:GMED). Renaissance Technologies has a $57.2 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $41.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions comprise Brian Ashford-Russell and Tim Woolley’s Polar Capital, Israel Englander’s Millennium Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Globus Medical Inc (NYSE:GMED), around 0.64% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, earmarking 0.45 percent of its 13F equity portfolio to GMED.

Since Globus Medical Inc (NYSE:GMED) has experienced falling interest from hedge fund managers, logic holds that there exists a select few funds that slashed their positions entirely by the end of the first quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dropped the biggest position of the 750 funds watched by Insider Monkey, totaling about $24.7 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $9.1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 10 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to Globus Medical Inc (NYSE:GMED). These stocks are Legg Mason, Inc. (NYSE:LM), Flex Ltd. (NASDAQ:FLEX), First Industrial Realty Trust, Inc. (NYSE:FR), and Planet Fitness Inc (NYSE:PLNT). This group of stocks’ market values are similar to GMED’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LM 38 944444 1
FLEX 24 801436 -10
FR 24 215043 5
PLNT 44 804544 10
Average 32.5 691367 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $691 million. That figure was $166 million in GMED’s case. Planet Fitness Inc (NYSE:PLNT) is the most popular stock in this table. On the other hand Flex Ltd. (NASDAQ:FLEX) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Globus Medical Inc (NYSE:GMED) is even less popular than FLEX. Hedge funds dodged a bullet by taking a bearish stance towards GMED. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. Unfortunately GMED wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); GMED investors were disappointed as the stock returned 11.1% during the second quarter (through June 22nd) 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 so far in 2020.

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