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Hedge Funds Have Never Been This Bullish On Globus Medical Inc (GMED)

The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Globus Medical Inc (NYSE:GMED), and what that likely means for the prospects of the company and its stock.

Globus Medical Inc (NYSE:GMED) has seen an increase in support from the world’s most elite money managers recently. GMED was in 24 hedge funds’ portfolios at the end of the first quarter of 2019. There were 18 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.

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 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

Michael Castor Sio Capital

We’re going to take a peek at the key hedge fund action encompassing Globus Medical Inc (NYSE:GMED).

How have hedgies been trading Globus Medical Inc (NYSE:GMED)?

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards GMED over the last 15 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

No of Hedge Funds with GMED Positions

More specifically, AQR Capital Management was the largest shareholder of Globus Medical Inc (NYSE:GMED), with a stake worth $107.6 million reported as of the end of March. Trailing AQR Capital Management was Renaissance Technologies, which amassed a stake valued at $67.2 million. Point72 Asset Management, GLG Partners, and Sio Capital were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, some big names have jumped into Globus Medical Inc (NYSE:GMED) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the most outsized position in Globus Medical Inc (NYSE:GMED). Point72 Asset Management had $24 million invested in the company at the end of the quarter. Michael Castor’s Sio Capital also made a $10 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Hintze’s CQS Cayman LP, Efrem Kamen’s Pura Vida Investments, and Israel Englander’s Millennium Management.

Let’s also examine hedge fund activity in other stocks similar to Globus Medical Inc (NYSE:GMED). These stocks are H&R Block, Inc. (NYSE:HRB), Curtiss-Wright Corp. (NYSE:CW), Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), and NewMarket Corporation (NYSE:NEU). This group of 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
HRB 16 238498 -2
CW 21 429271 1
ASR 8 35587 3
NEU 21 88478 5
Average 16.5 197959 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $265 million in GMED’s case. Curtiss-Wright Corp. (NYSE:CW) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Globus Medical Inc (NYSE:GMED) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 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 -19.9% during the same 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 13 of these stocks already outperformed the market in Q2.

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

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