Hedge Funds Are Warming Up To GlaxoSmithKline plc (GSK)

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards GlaxoSmithKline plc (NYSE:GSK). Currently the only ETF with more than 5% allocation to GSK is VanEck Vectors Pharmaceutical ETF (NASDAQ:PPH)

Is GlaxoSmithKline plc (NYSE:GSK) the right investment to pursue these days? Hedge funds are getting more optimistic. The number of bullish hedge fund bets inched up by 1 recently. Our calculations also showed that GSK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GSK was in 26 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with GSK positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Rogers Ariel Investments

John Rogers of Ariel Investments

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the new hedge fund action regarding GlaxoSmithKline plc (NYSE:GSK).

What does smart money think about GlaxoSmithKline plc (NYSE:GSK)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in GSK a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

No of Hedge Funds with GSK Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in GlaxoSmithKline plc (NYSE:GSK), worth close to $749.1 million, accounting for 0.6% of its total 13F portfolio. Coming in second is Ken Fisher of Fisher Asset Management, with a $651.6 million position; 0.7% of its 13F portfolio is allocated to the company. Other peers that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Kahn Brothers and John W. Rogers’s Ariel Investments. In terms of the portfolio weights assigned to each position Eversept Partners allocated the biggest weight to GlaxoSmithKline plc (NYSE:GSK), around 13.22% of its portfolio. Kahn Brothers is also relatively very bullish on the stock, designating 8.67 percent of its 13F equity portfolio to GSK.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into GlaxoSmithKline plc (NYSE:GSK) headfirst. Segantii Capital, managed by Simon Sadler, established the biggest position in GlaxoSmithKline plc (NYSE:GSK). Segantii Capital had $4.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $3.8 million position during the quarter. The following funds were also among the new GSK investors: Donald Sussman’s Paloma Partners, Ronald Hua’s Qtron Investments, and Matthew Tewksbury’s Stevens Capital Management.

Let’s go over hedge fund activity in other stocks similar to GlaxoSmithKline plc (NYSE:GSK). These stocks are The Toronto-Dominion Bank (NYSE:TD), NVIDIA Corporation (NASDAQ:NVDA), Starbucks Corporation (NASDAQ:SBUX), and Linde plc (NYSE:LIN). This group of stocks’ market caps are similar to GSK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TD 15 295029 -3
NVDA 48 1473439 3
SBUX 52 5593793 3
LIN 44 2523402 3
Average 39.75 2471416 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $2471 million. That figure was $1891 million in GSK’s case. Starbucks Corporation (NASDAQ:SBUX) is the most popular stock in this table. On the other hand The Toronto-Dominion Bank (NYSE:TD) is the least popular one with only 15 bullish hedge fund positions. GlaxoSmithKline plc (NYSE:GSK) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on GSK, though not to the same extent, as the stock returned 7.7% during the first two months of the fourth quarter and outperformed the market.

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