We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Globus Medical Inc (NYSE:GMED) and determine whether hedge funds skillfully traded this stock.
Globus Medical Inc (NYSE:GMED) investors should be aware of an increase in support from the world’s most elite money managers in recent months. Globus Medical Inc (NYSE:GMED) was in 37 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 35 hedge funds in our database with GMED positions at the end of the second quarter. Our calculations also showed that GMED isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s analyze the key hedge fund action regarding Globus Medical Inc (NYSE:GMED).
Do Hedge Funds Think GMED Is A Good Stock To Buy Now?
At third quarter’s end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in GMED over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Polar Capital was the largest shareholder of Globus Medical Inc (NYSE:GMED), with a stake worth $54.7 million reported as of the end of September. Trailing Polar Capital was Consonance Capital Management, which amassed a stake valued at $45.1 million. Millennium Management, Arrowstreet Capital, and Balyasny Asset Management 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 Consonance Capital Management allocated the biggest weight to Globus Medical Inc (NYSE:GMED), around 24.71% of its 13F portfolio. Integral Health Asset Management is also relatively very bullish on the stock, designating 3.3 percent of its 13F equity portfolio to GMED.
As industrywide interest jumped, key money managers have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the most valuable position in Globus Medical Inc (NYSE:GMED). Tudor Investment Corp had $1.5 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.3 million investment in the stock during the quarter. The following funds were also among the new GMED investors: Hoon Kim’s Quantinno Capital, Ran Pang’s Quantamental Technologies, and Peter Algert’s Algert Global.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Globus Medical Inc (NYSE:GMED) but similarly valued. We will take a look at US Foods Holding Corp. (NYSE:USFD), AerCap Holdings N.V. (NYSE:AER), Kilroy Realty Corp (NYSE:KRC), Apartment Income REIT Corp. (NYSE:AIRC), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), Advanced Drainage Systems Inc. (NYSE:WMS), and Brooks Automation, Inc. (NASDAQ:BRKS). This group of stocks’ market valuations resemble GMED’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| USFD | 29 | 1071095 | -6 |
| AER | 42 | 1448787 | -3 |
| KRC | 24 | 422839 | -2 |
| AIRC | 17 | 270935 | 3 |
| LECO | 21 | 288792 | 1 |
| WMS | 21 | 1092988 | -5 |
| BRKS | 29 | 577566 | -3 |
| Average | 26.1 | 739000 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $739 million. That figure was $267 million in GMED’s case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand Apartment Income REIT Corp. (NYSE:AIRC) is the least popular one with only 17 bullish hedge fund positions. Globus Medical Inc (NYSE:GMED) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GMED is 77. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, GMED wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GMED were disappointed as the stock returned -12.9% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
