With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was GW Pharmaceuticals plc (NASDAQ:GWPH).
Is GWPH a good stock to buy now? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund positions dropped by 1 recently. GW Pharmaceuticals plc (NASDAQ:GWPH) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 32. Our calculations also showed that GWPH 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.
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 S&P 500 ETFs by 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now let’s take a glance at the new hedge fund action surrounding GW Pharmaceuticals plc (NASDAQ:GWPH).
Do Hedge Funds Think GWPH Is A Good Stock To Buy Now?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GWPH over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in GW Pharmaceuticals plc (NASDAQ:GWPH) was held by Point72 Asset Management, which reported holding $52.8 million worth of stock at the end of September. It was followed by Great Point Partners with a $50.6 million position. Other investors bullish on the company included Clough Capital Partners, Baker Bros. Advisors, and Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Copernicus Capital Management allocated the biggest weight to GW Pharmaceuticals plc (NASDAQ:GWPH), around 4.87% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, designating 4.56 percent of its 13F equity portfolio to GWPH.
Judging by the fact that GW Pharmaceuticals plc (NASDAQ:GWPH) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies that decided to sell off their positions entirely by the end of the third quarter. It’s worth mentioning that Justin John Ferayorni’s Tamarack Capital Management dumped the largest investment of all the hedgies followed by Insider Monkey, comprising close to $11 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $3.2 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as GW Pharmaceuticals plc (NASDAQ:GWPH) but similarly valued. These stocks are Crane Co. (NYSE:CR), Atlantica Sustainable Infrastructure plc (NASDAQ:AY), Werner Enterprises, Inc. (NASDAQ:WERN), Lexington Realty Trust (NYSE:LXP), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), Youdao, Inc. (NYSE:DAO), and Crocs, Inc. (NASDAQ:CROX). All of these stocks’ market caps are closest to GWPH’s market cap.
|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 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $318 million. That figure was $201 million in GWPH’s case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand Youdao, Inc. (NYSE:DAO) is the least popular one with only 10 bullish hedge fund positions. GW Pharmaceuticals plc (NASDAQ:GWPH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GWPH is 33.9. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on GWPH as the stock returned 24.5% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.