At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Galmed Pharmaceuticals Ltd (NASDAQ:GLMD) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Hedge fund interest in Galmed Pharmaceuticals Ltd (NASDAQ:GLMD) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare GLMD to other stocks including Xeris Pharmaceuticals, Inc. (NASDAQ:XERS), Inspired Entertainment, Inc. (NASDAQ:INSE), and Potbelly Corp (NASDAQ:PBPB) to get a better sense of its popularity.
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At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the latest hedge fund action regarding Galmed Pharmaceuticals Ltd (NASDAQ:GLMD).
What have hedge funds been doing with Galmed Pharmaceuticals Ltd (NASDAQ:GLMD)?
At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in GLMD a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Biotechnology Value Fund / BVF Inc held the most valuable stake in Galmed Pharmaceuticals Ltd (NASDAQ:GLMD), which was worth $6.3 million at the end of the third quarter. On the second spot was Nantahala Capital Management which amassed $4.5 million worth of shares. Vivo Capital, 683 Capital Partners, and Baker Bros. Advisors 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 Biotechnology Value Fund / BVF Inc allocated the biggest weight to Galmed Pharmaceuticals Ltd (NASDAQ:GLMD), around 0.59% of its 13F portfolio. P.A.W. CAPITAL PARTNERS is also relatively very bullish on the stock, earmarking 0.47 percent of its 13F equity portfolio to GLMD.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the first quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Galmed Pharmaceuticals Ltd (NASDAQ:GLMD) but similarly valued. These stocks are Xeris Pharmaceuticals, Inc. (NASDAQ:XERS), Inspired Entertainment, Inc. (NASDAQ:INSE), Potbelly Corp (NASDAQ:PBPB), and Arbutus Biopharma Corp (NASDAQ:ABUS). This group of stocks’ market caps are similar to GLMD’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $18 million in GLMD’s case. Xeris Pharmaceuticals, Inc. (NASDAQ:XERS) is the most popular stock in this table. On the other hand Inspired Entertainment, Inc. (NASDAQ:INSE) is the least popular one with only 6 bullish hedge fund positions. Galmed Pharmaceuticals Ltd (NASDAQ:GLMD) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on GLMD as the stock returned 38.2% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.