At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Gossamer Bio, Inc. (NASDAQ:GOSS) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Gossamer Bio, Inc. (NASDAQ:GOSS) shareholders have witnessed a decrease in hedge fund sentiment recently. GOSS was in 10 hedge funds’ portfolios at the end of the first quarter of 2020. There were 12 hedge funds in our database with GOSS positions at the end of the previous quarter. Our calculations also showed that GOSS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
To the average investor there are many signals shareholders have at their disposal to analyze publicly traded companies. Some of the most under-the-radar signals are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outclass the S&P 500 by a very impressive amount (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action encompassing Gossamer Bio, Inc. (NASDAQ:GOSS).
How have hedgies been trading Gossamer Bio, Inc. (NASDAQ:GOSS)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in GOSS over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Hillhouse Capital Management held the most valuable stake in Gossamer Bio, Inc. (NASDAQ:GOSS), which was worth $60 million at the end of the third quarter. On the second spot was Alyeska Investment Group which amassed $4.8 million worth of shares. Clough Capital Partners, Citadel Investment Group, and Redmile Group 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 Hillhouse Capital Management allocated the biggest weight to Gossamer Bio, Inc. (NASDAQ:GOSS), around 0.81% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, dishing out 0.46 percent of its 13F equity portfolio to GOSS.
Judging by the fact that Gossamer Bio, Inc. (NASDAQ:GOSS) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there is a sect of funds who sold off their entire stakes in the first quarter. It’s worth mentioning that Bhagwan Jay Rao’s Integral Health Asset Management dumped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $0.9 million in stock, and Matthew Strobeck’s Birchview Capital was right behind this move, as the fund dropped about $0.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 2 funds in the first quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Gossamer Bio, Inc. (NASDAQ:GOSS) but similarly valued. These stocks are NetGear, Inc. (NASDAQ:NTGR), Kadmon Holdings, Inc. (NYSE:KDMN), Systemax Inc. (NYSE:SYX), and Central Securities Corporation (NYSE:CET). This group of stocks’ market valuations are similar to GOSS’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 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $81 million in GOSS’s case. Kadmon Holdings, Inc. (NYSE:KDMN) is the most popular stock in this table. On the other hand Central Securities Corporation (NYSE:CET) is the least popular one with only 2 bullish hedge fund positions. Gossamer Bio, Inc. (NASDAQ:GOSS) is not the least popular stock in this group but hedge fund interest is still below 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 gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on GOSS as the stock returned 28.1% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.