Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Gilead Sciences, Inc. (NASDAQ:GILD).
Is Gilead Sciences, Inc. (NASDAQ:GILD) a buy here? The best stock pickers are in a bullish mood. The number of bullish hedge fund positions rose by 1 lately. Our calculations also showed that GILD 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.
We’re going to take a gander at the key hedge fund action regarding Gilead Sciences, Inc. (NASDAQ:GILD).
What does the smart money think about Gilead Sciences, Inc. (NASDAQ:GILD)?
At the end of the first quarter, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GILD over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Gilead Sciences, Inc. (NASDAQ:GILD), with a stake worth $582.3 million reported as of the end of March. Trailing AQR Capital Management was Renaissance Technologies, which amassed a stake valued at $527.9 million. D E Shaw, Citadel Investment Group, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers were breaking ground themselves. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, assembled the most outsized position in Gilead Sciences, Inc. (NASDAQ:GILD). Healthcor Management LP had $40.5 million invested in the company at the end of the quarter. Mike Masters’s Masters Capital Management also initiated a $19.5 million position during the quarter. The following funds were also among the new GILD investors: Vishal Saluja and Pham Quang’s Endurant Capital Management, Efrem Kamen’s Pura Vida Investments, and Eli Casdin’s Casdin Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Gilead Sciences, Inc. (NASDAQ:GILD) but similarly valued. These stocks are ASML Holding N.V. (NASDAQ:ASML), Booking Holdings Inc. (NASDAQ:BKNG), Charter Communications, Inc. (NASDAQ:CHTR), and Caterpillar Inc. (NYSE:CAT). All of these stocks’ market caps resemble GILD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASML | 15 | 504431 | -1 |
| BKNG | 77 | 5667848 | -7 |
| CHTR | 67 | 7391525 | 3 |
| CAT | 53 | 3394463 | -7 |
| Average | 53 | 4239567 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 53 hedge funds with bullish positions and the average amount invested in these stocks was $4240 million. That figure was $3780 million in GILD’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 15 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. 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 GILD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GILD were disappointed as the stock returned -2.6% 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.
