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Were Hedge Funds Right About Gilead Sciences (GILD)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Gilead Sciences, Inc. (NASDAQ:GILD).

Gilead Sciences, Inc. (NASDAQ:GILD) has experienced an increase in support from the world’s most elite money managers of late. GILD was in 67 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 66 hedge funds in our database with GILD positions at the end of the previous quarter. Our calculations also showed that GILD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the new hedge fund action encompassing Gilead Sciences, Inc. (NASDAQ:GILD).

Hedge fund activity in Gilead Sciences, Inc. (NASDAQ:GILD)

At Q4’s end, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the previous quarter. By comparison, 57 hedge funds held shares or bullish call options in GILD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Gilead Sciences, Inc. (NASDAQ:GILD), with a stake worth $1102.3 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $464.5 million. D E Shaw, Two Sigma Advisors, and Partner Fund 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 Healthcare Value Capital allocated the biggest weight to Gilead Sciences, Inc. (NASDAQ:GILD), around 13.39% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, designating 9.36 percent of its 13F equity portfolio to GILD.

Consequently, key hedge funds have jumped into Gilead Sciences, Inc. (NASDAQ:GILD) headfirst. Camber Capital Management, managed by Stephen DuBois, created the biggest position in Gilead Sciences, Inc. (NASDAQ:GILD). Camber Capital Management had $97.5 million invested in the company at the end of the quarter. Michael Rockefeller and Karl Kroeker’s Woodline Partners also initiated a $55.1 million position during the quarter. The following funds were also among the new GILD investors: Steve Cohen’s Point72 Asset Management, Michael Castor’s Sio Capital, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.

Let’s go over hedge fund activity in other stocks similar to Gilead Sciences, Inc. (NASDAQ:GILD). These stocks are Caterpillar Inc. (NYSE:CAT), Goldman Sachs Group, Inc. (NYSE:GS), Enbridge Inc (NYSE:ENB), and Mondelez International Inc (NASDAQ:MDLZ). This group of stocks’ market caps are similar to GILD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAT 52 3227642 13
GS 75 7581397 -3
ENB 21 285809 1
MDLZ 50 2343152 -6
Average 49.5 3359500 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 49.5 hedge funds with bullish positions and the average amount invested in these stocks was $3360 million. That figure was $3723 million in GILD’s case. Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 21 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 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 lost 1.0% in 2020 through April 20th but still beat the market by 11 percentage points. Hedge funds were also right about betting on GILD as the stock returned 26.2% in 2020 (through April 20th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.

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