Is GlaxoSmithKline plc (NYSE:GSK) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
GlaxoSmithKline plc (NYSE:GSK) has experienced an increase in support from the world’s most elite money managers lately. GSK was in 29 hedge funds’ portfolios at the end of the first quarter of 2019. There were 23 hedge funds in our database with GSK positions at the end of the previous quarter. Our calculations also showed that gsk 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.
Let’s check out the key hedge fund action surrounding GlaxoSmithKline plc (NYSE:GSK).
What have hedge funds been doing with GlaxoSmithKline plc (NYSE:GSK)?
At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GSK over the last 15 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in GlaxoSmithKline plc (NYSE:GSK), which was worth $596.5 million at the end of the first quarter. On the second spot was Fisher Asset Management which amassed $538.9 million worth of shares. Moreover, Arrowstreet Capital, Ariel Investments, and Millennium Management were also bullish on GlaxoSmithKline plc (NYSE:GSK), allocating a large percentage of their portfolios to this stock.
Now, key money managers were leading the bulls’ herd. Huber Capital Management, managed by Joe Huber, assembled the most valuable position in GlaxoSmithKline plc (NYSE:GSK). Huber Capital Management had $12.6 million invested in the company at the end of the quarter. Michael Castor’s Sio Capital also initiated a $10.9 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Bain Capital’s Brookside Capital, and David Costen Haley’s HBK Investments.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as GlaxoSmithKline plc (NYSE:GSK) but similarly valued. We will take a look at AstraZeneca plc (NYSE:AZN), Rio Tinto Group (NYSE:RIO), The Toronto-Dominion Bank (NYSE:TD), and Texas Instruments Incorporated (NASDAQ:TXN). This group of stocks’ market values resemble GSK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AZN | 28 | 1672921 | 7 |
| RIO | 22 | 1878270 | -1 |
| TD | 18 | 818086 | 1 |
| TXN | 43 | 2309168 | -1 |
| Average | 27.75 | 1669611 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $1670 million. That figure was $1850 million in GSK’s case. Texas Instruments Incorporated (NASDAQ:TXN) is the most popular stock in this table. On the other hand The Toronto-Dominion Bank (NYSE:TD) is the least popular one with only 18 bullish hedge fund positions. GlaxoSmithKline plc (NYSE:GSK) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 GSK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GSK were disappointed as the stock returned -6.1% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
