In this article we will check out the progression of hedge fund sentiment towards Galectin Therapeutics Inc. (NASDAQ:GALT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Galectin Therapeutics Inc. (NASDAQ:GALT) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. Our calculations also showed that GALT 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 51 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind let’s analyze the recent hedge fund action encompassing Galectin Therapeutics Inc. (NASDAQ:GALT).
How are hedge funds trading Galectin Therapeutics Inc. (NASDAQ:GALT)?
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in GALT over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Galectin Therapeutics Inc. (NASDAQ:GALT), with a stake worth $0.1 million reported as of the end of September. Trailing Citadel Investment Group was Citadel Investment Group, which amassed a stake valued at $0.1 million. HighVista Strategies was 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 HighVista Strategies allocated the biggest weight to Galectin Therapeutics Inc. (NASDAQ:GALT), around 0.05% of its 13F portfolio. Citadel Investment Group is also relatively very bullish on the stock, dishing out 0 percent of its 13F equity portfolio to GALT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: D E Shaw. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified GALT as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks similar to Galectin Therapeutics Inc. (NASDAQ:GALT). We will take a look at Neptune Wellness Solutions Inc. (NASDAQ:NEPT), GP Strategies Corporation (NYSE:GPX), Aptorum Group Limited (NASDAQ:APM), and Hawthorn Bancshares, Inc. (NASDAQ:HWBK). This group of stocks’ market values resemble GALT’s market value.
|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 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $0 million in GALT’s case. GP Strategies Corporation (NYSE:GPX) is the most popular stock in this table. On the other hand Aptorum Group Limited (NASDAQ:APM) is the least popular one with only 1 bullish hedge fund positions. Galectin Therapeutics Inc. (NASDAQ:GALT) 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on GALT as the stock returned 54.6% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.