Is GSK A Good Stock To Buy According To Hedge Funds?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding GlaxoSmithKline plc (NYSE:GSK).

Is GSK a good stock to buy? Hedge funds were in a bullish mood. The number of bullish hedge fund positions went up by 3 recently. GlaxoSmithKline plc (NYSE:GSK) was in 31 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 35. Our calculations also showed that GSK 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.

In the eyes of most market participants, hedge funds are seen as slow, outdated investment vehicles of years past. While there are over 8000 funds trading today, Our experts look at the masters of this group, around 850 funds. These money managers handle most of all hedge funds’ total asset base, and by keeping track of their inimitable equity investments, Insider Monkey has unearthed many investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Michael Castor of Sio Capital

Michael Castor of Sio Capital

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 let’s take a gander at the fresh hedge fund action surrounding GlaxoSmithKline plc (NYSE:GSK).

Do Hedge Funds Think GSK Is A Good Stock To Buy Now?

At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GSK over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in GlaxoSmithKline plc (NYSE:GSK), which was worth $689.9 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $610.8 million worth of shares. Arrowstreet Capital, Two Sigma Advisors, and Kahn Brothers 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 GlaxoSmithKline plc (NYSE:GSK), around 12.4% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, designating 10.04 percent of its 13F equity portfolio to GSK.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Galibier Capital Management, managed by Joseph Sirdevan, created the most valuable position in GlaxoSmithKline plc (NYSE:GSK). Galibier Capital Management had $17 million invested in the company at the end of the quarter. Michael Castor’s Sio Capital also made a $7.8 million investment in the stock during the quarter. The other funds with brand new GSK positions are Matthew Hulsizer’s PEAK6 Capital Management, Matthew Tewksbury’s Stevens Capital Management, and Michael Gelband’s ExodusPoint Capital.

Let’s check out hedge fund activity in other stocks similar to GlaxoSmithKline plc (NYSE:GSK). We will take a look at Sony Corporation (NYSE:SNE), The Boeing Company (NYSE:BA), ServiceNow Inc (NYSE:NOW), 3M Company (NYSE:MMM), HDFC Bank Limited (NYSE:HDB), Fidelity National Information Services Inc. (NYSE:FIS), and TOTAL SE (NYSE:TOT). This group of stocks’ market valuations are similar to GSK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNE 26 369841 -2
BA 43 1702712 4
NOW 82 5945474 -4
MMM 56 1347738 14
HDB 34 1121313 -8
FIS 88 7940617 -23
TOT 18 639601 -1
Average 49.6 2723899 -2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 49.6 hedge funds with bullish positions and the average amount invested in these stocks was $2724 million. That figure was $1772 million in GSK’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand TOTAL SE (NYSE:TOT) is the least popular one with only 18 bullish hedge fund positions. GlaxoSmithKline plc (NYSE:GSK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GSK is 43.9. 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 negative signal and 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 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 surpassed the market again by 16.4 percentage points. Unfortunately GSK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GSK investors were disappointed as the stock returned -0.4% since the end of September (through 12/18) 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 most of these stocks already outperformed the market in 2020.

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