Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Globus Medical Inc (NYSE:GMED).
Is GMED a good stock to buy? Globus Medical Inc (NYSE:GMED) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. GMED has seen an increase in hedge fund sentiment lately. There were 32 hedge funds in our database with GMED holdings at the end of June. Our calculations also showed that GMED isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a peek at the fresh hedge fund action surrounding Globus Medical Inc (NYSE:GMED).
Do Hedge Funds Think GMED Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GMED over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Globus Medical Inc (NYSE:GMED), which was worth $22 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $16.3 million worth of shares. Millennium Management, GLG Partners, 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 Integral Health Asset Management allocated the biggest weight to Globus Medical Inc (NYSE:GMED), around 0.98% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, designating 0.82 percent of its 13F equity portfolio to GMED.
As one would reasonably expect, specific money managers have jumped into Globus Medical Inc (NYSE:GMED) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, established the largest position in Globus Medical Inc (NYSE:GMED). Two Sigma Advisors had $6.2 million invested in the company at the end of the quarter. Bhagwan Jay Rao’s Integral Health Asset Management also initiated a $3.2 million position during the quarter. The other funds with brand new GMED positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Hoon Kim’s Quantinno Capital, and Bruce Kovner’s Caxton Associates LP.
Let’s go over hedge fund activity in other stocks similar to Globus Medical Inc (NYSE:GMED). We will take a look at Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), Landstar System, Inc. (NASDAQ:LSTR), Descartes Systems Group (NASDAQ:DSGX), American Campus Communities, Inc. (NYSE:ACC), Sasol Limited (NYSE:SSL), Prosperity Bancshares, Inc. (NYSE:PB), and Zions Bancorporation, National Association (NASDAQ:ZION). 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|
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $355 million. That figure was $101 million in GMED’s case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 5 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 76. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on GMED as the stock returned 32% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.