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Hedge Funds Have Never Been This Bullish On Quidel Corporation (QDEL)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Quidel Corporation (NASDAQ:QDEL) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Quidel Corporation (NASDAQ:QDEL) was in 32 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. QDEL has experienced an increase in hedge fund interest lately. There were 22 hedge funds in our database with QDEL holdings at the end of March. Our calculations also showed that QDEL isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing Quidel Corporation (NASDAQ:QDEL).

How have hedgies been trading Quidel Corporation (NASDAQ:QDEL)?

At the end of June, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 45% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in QDEL a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is QDEL A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Mario Gabelli’s GAMCO Investors has the most valuable position in Quidel Corporation (NASDAQ:QDEL), worth close to $78.1 million, corresponding to 0.9% of its total 13F portfolio. Coming in second is Holocene Advisors, led by Brandon Haley, holding a $51.5 million call position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism consist of Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and Donald Sussman’s Paloma Partners. In terms of the portfolio weights assigned to each position Birchview Capital allocated the biggest weight to Quidel Corporation (NASDAQ:QDEL), around 6.89% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, setting aside 6.48 percent of its 13F equity portfolio to QDEL.

As one would reasonably expect, key hedge funds were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the biggest position in Quidel Corporation (NASDAQ:QDEL). Two Sigma Advisors had $20.3 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $19.9 million investment in the stock during the quarter. The following funds were also among the new QDEL investors: Brandon Haley’s Holocene Advisors, Dmitry Balyasny’s Balyasny Asset Management, and Michael Rockefeller and KarláKroeker’s Woodline Partners.

Let’s go over hedge fund activity in other stocks similar to Quidel Corporation (NASDAQ:QDEL). These stocks are CenterPoint Energy, Inc. (NYSE:CNP), Annaly Capital Management, Inc. (NYSE:NLY), PPD, Inc. (NASDAQ:PPD), Lamb Weston Holdings, Inc. (NYSE:LW), Guidewire Software Inc (NYSE:GWRE), Brookfield Property Partners LP (NYSE:BPY), and Fidelity National Financial Inc (NYSE:FNF). This group of stocks’ market valuations are closest to QDEL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNP 30 480314 -2
NLY 21 288668 -6
PPD 27 620340 0
LW 25 189982 -4
GWRE 29 1008560 -5
BPY 6 43730 -1
FNF 47 1052423 4
Average 26.4 526288 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $526 million. That figure was $283 million in QDEL’s case. Fidelity National Financial Inc (NYSE:FNF) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NYSE:BPY) is the least popular one with only 6 bullish hedge fund positions. Quidel Corporation (NASDAQ:QDEL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QDEL is 71.7. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately QDEL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on QDEL were disappointed as the stock returned -28.8% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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