Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about Dr. Reddy’s Laboratories Limited (NYSE:RDY).
Dr. Reddy’s Laboratories Limited (NYSE:RDY) investors should be aware of an increase in enthusiasm from smart money lately. Our calculations also showed that RDY isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are plenty of methods shareholders have at their disposal to size up publicly traded companies. Two of the most underrated methods are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outclass the broader indices by a significant amount (see the details here).
We’re going to view the fresh hedge fund action surrounding Dr. Reddy’s Laboratories Limited (NYSE:RDY).
What does the smart money think about Dr. Reddy’s Laboratories Limited (NYSE:RDY)?
At Q4’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in RDY a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Jim Simons’s Renaissance Technologies has the biggest position in Dr. Reddy’s Laboratories Limited (NYSE:RDY), worth close to $38.3 million, accounting for less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is AQR Capital Management, led by Cliff Asness, holding a $20.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions consist of D. E. Shaw’s D E Shaw, Gifford Combs’s Dalton Investments and Noam Gottesman’s GLG Partners.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. GLG Partners, managed by Noam Gottesman, created the most valuable position in Dr. Reddy’s Laboratories Limited (NYSE:RDY). GLG Partners had $3.6 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Ken Griffin’s Citadel Investment Group, and Ronald Hua’s Qtron Investments.
Let’s go over hedge fund activity in other stocks similar to Dr. Reddy’s Laboratories Limited (NYSE:RDY). These stocks are Zendesk Inc (NYSE:ZEN), Integrated Device Technology, Inc. (NASDAQ:IDTI), LATAM Airlines Group S.A. (NYSE:LTM), and Oaktree Capital Group LLC (NYSE:OAK). This group of stocks’ market values match RDY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZEN | 53 | 1794269 | 9 |
| IDTI | 35 | 1125743 | 0 |
| LTM | 8 | 22988 | 3 |
| OAK | 7 | 184200 | 0 |
| Average | 25.75 | 781800 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $782 million. That figure was $84 million in RDY’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Oaktree Capital Group LLC (NYSE:OAK) is the least popular one with only 7 bullish hedge fund positions. Dr. Reddy’s Laboratories Limited (NYSE:RDY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately RDY wasn’t in this group. Hedge funds that bet on RDY were disappointed as the stock returned 5.3% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
