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Hedge Funds Souring On Gilead Sciences, Inc. (GILD)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Gilead Sciences, Inc. (NASDAQ:GILD) based on that data and determine whether they were really smart about the stock.

Is Gilead Sciences, Inc. (NASDAQ:GILD) a buy here? The smart money was in a pessimistic mood. The number of bullish hedge fund bets dropped by 8 in recent months. Gilead Sciences, Inc. (NASDAQ:GILD) was in 68 hedge funds’ portfolios at the end of June. The all time high for this statistics is 93. Our calculations also showed that GILD 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s review the fresh hedge fund action regarding Gilead Sciences, Inc. (NASDAQ:GILD).

How are hedge funds trading Gilead Sciences, Inc. (NASDAQ:GILD)?

At the end of June, a total of 68 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GILD over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Gilead Sciences, Inc. (NASDAQ:GILD) was held by Renaissance Technologies, which reported holding $684.9 million worth of stock at the end of September. It was followed by AQR Capital Management with a $352.7 million position. Other investors bullish on the company included Citadel Investment Group, Diamond Hill Capital, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Healthcare Value Capital allocated the biggest weight to Gilead Sciences, Inc. (NASDAQ:GILD), around 9.82% of its 13F portfolio. Unio Capital is also relatively very bullish on the stock, dishing out 4.13 percent of its 13F equity portfolio to GILD.

Judging by the fact that Gilead Sciences, Inc. (NASDAQ:GILD) has faced bearish sentiment from hedge fund managers, it’s easy to see that there were a few money managers that elected to cut their entire stakes in the second quarter. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management dumped the largest stake of all the hedgies followed by Insider Monkey, comprising about $83.2 million in stock, and Fang Zheng’s Keywise Capital Management was right behind this move, as the fund cut about $61.6 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 8 funds in the second quarter.

Let’s check out hedge fund activity in other stocks similar to Gilead Sciences, Inc. (NASDAQ:GILD). These stocks are Royal Bank of Canada (NYSE:RY), United Parcel Service, Inc. (NYSE:UPS), Anheuser-Busch InBev SA/NV (NYSE:BUD), HSBC Holdings plc (NYSE:HSBC), JD.Com Inc (NASDAQ:JD), Raytheon Technologies Corp (NYSE:RTX), and 3M Company (NYSE:MMM). This group of stocks’ market caps are closest to GILD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RY 16 237643 0
UPS 37 781926 -11
BUD 17 860874 0
HSBC 10 384518 -4
JD 87 11211241 -3
RTX 59 2951712 -3
MMM 42 1038241 -2
Average 38.3 2495165 -3.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.3 hedge funds with bullish positions and the average amount invested in these stocks was $2495 million. That figure was $2286 million in GILD’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 10 bullish hedge fund positions. Gilead Sciences, Inc. (NASDAQ:GILD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GILD is 56.6. 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 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately GILD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GILD were disappointed as the stock returned -14.1% 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.