Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Globus Medical Inc (NYSE:GMED).
Is Globus Medical Inc (NYSE:GMED) worth your attention right now? Money managers are betting on the stock. The number of bullish hedge fund positions improved by 5 recently. Our calculations also showed that GMED isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the new hedge fund action encompassing Globus Medical Inc (NYSE:GMED).
How have hedgies been trading Globus Medical Inc (NYSE:GMED)?
At Q4’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in GMED a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Globus Medical Inc (NYSE:GMED), with a stake worth $70.7 million reported as of the end of September. Trailing AQR Capital Management was Renaissance Technologies, which amassed a stake valued at $63.5 million. Balyasny Asset Management, Millennium Management, 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 Algert Coldiron Investors allocated the biggest weight to Globus Medical Inc (NYSE:GMED), around 0.58% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, earmarking 0.33 percent of its 13F equity portfolio to GMED.
With a general bullishness amongst the heavyweights, key money managers have jumped into Globus Medical Inc (NYSE:GMED) headfirst. Cinctive Capital Management, managed by Richard SchimeláandáLawrence Sapanski, created the biggest position in Globus Medical Inc (NYSE:GMED). Cinctive Capital Management had $3.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $2.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, and Peter Muller’s PDT Partners.
Let’s now review hedge fund activity in other stocks similar to Globus Medical Inc (NYSE:GMED). These stocks are Casey’s General Stores, Inc. (NASDAQ:CASY), Western Alliance Bancorporation (NYSE:WAL), AGCO Corporation (NYSE:AGCO), and Hudson Pacific Properties Inc (NYSE:HPP). All of these stocks’ market caps are closest to GMED’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CASY | 22 | 142114 | 4 |
| WAL | 32 | 246148 | 3 |
| AGCO | 28 | 302528 | 1 |
| HPP | 19 | 276484 | -8 |
| Average | 25.25 | 241819 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $257 million in GMED’s case. Western Alliance Bancorporation (NYSE:WAL) is the most popular stock in this table. On the other hand Hudson Pacific Properties Inc (NYSE:HPP) is the least popular one with only 19 bullish hedge fund positions. Globus Medical Inc (NYSE:GMED) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately GMED wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GMED were disappointed as the stock returned -31.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
