Hedge Funds Are Souring On Hologic, Inc. (HOLX)

In this article we are going to use hedge fund sentiment as a tool and determine whether Hologic, Inc. (NASDAQ:HOLX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Hologic, Inc. (NASDAQ:HOLX) undervalued? Hedge funds were in a pessimistic mood. The number of long hedge fund positions shrunk by 11 recently. Hologic, Inc. (NASDAQ:HOLX) was in 32 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 50. Our calculations also showed that HOLX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 43 hedge funds in our database with HOLX holdings at the end of December.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a look at the latest hedge fund action encompassing Hologic, Inc. (NASDAQ:HOLX).

Do Hedge Funds Think HOLX Is A Good Stock To Buy Now?

At first quarter’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the previous quarter. On the other hand, there were a total of 41 hedge funds with a bullish position in HOLX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Marshall Wace LLP held the most valuable stake in Hologic, Inc. (NASDAQ:HOLX), which was worth $70.7 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $69.9 million worth of shares. Renaissance Technologies, Two Sigma Advisors, and GLG Partners 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 Tamarack Capital Management allocated the biggest weight to Hologic, Inc. (NASDAQ:HOLX), around 4.2% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, earmarking 0.92 percent of its 13F equity portfolio to HOLX.

Because Hologic, Inc. (NASDAQ:HOLX) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers that decided to sell off their positions entirely heading into Q2. Interestingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP said goodbye to the biggest investment of the 750 funds watched by Insider Monkey, valued at close to $74.1 million in stock. Brandon Haley’s fund, Holocene Advisors, also dropped its stock, about $55 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 11 funds heading into Q2.

Let’s also examine hedge fund activity in other stocks similar to Hologic, Inc. (NASDAQ:HOLX). These stocks are ZoomInfo Technologies Inc. (NASDAQ:ZI), Halliburton Company (NYSE:HAL), DISH Network Corp. (NASDAQ:DISH), Xylem Inc (NYSE:XYL), StoneCo Ltd. (NASDAQ:STNE), The Cooper Companies, Inc. (NYSE:COO), and FirstEnergy Corp. (NYSE:FE). This group of stocks’ market caps are closest to HOLX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZI 24 318610 -7
HAL 28 1015940 -3
DISH 51 2205763 -6
XYL 23 846370 2
STNE 39 2157227 -8
COO 43 1378040 12
FE 51 1840599 1
Average 37 1394650 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1395 million. That figure was $517 million in HOLX’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 23 bullish hedge fund positions. Hologic, Inc. (NASDAQ:HOLX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HOLX is 29.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately HOLX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); HOLX investors were disappointed as the stock returned -9% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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