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Is Hologic, Inc. (HOLX) A Good Stock To Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Hologic, Inc. (NASDAQ:HOLX) the right pick for your portfolio? Hedge funds are reducing their bets on the stock. The number of bullish hedge fund bets dropped by 5 in recent months. Our calculations also showed that holx 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.

GLENVIEW CAPITAL

We’re going to take a look at the latest hedge fund action encompassing Hologic, Inc. (NASDAQ:HOLX).

How are hedge funds trading Hologic, Inc. (NASDAQ:HOLX)?

Heading into the second quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in HOLX a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

No of Hedge Funds with HOLX Positions

When looking at the institutional investors followed by Insider Monkey, Larry Robbins’s Glenview Capital has the largest position in Hologic, Inc. (NASDAQ:HOLX), worth close to $520.7 million, accounting for 4.6% of its total 13F portfolio. On Glenview Capital’s heels is D E Shaw, led by D. E. Shaw, holding a $62.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions encompass Noam Gottesman’s GLG Partners, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management.

Judging by the fact that Hologic, Inc. (NASDAQ:HOLX) has experienced falling interest from the aggregate hedge fund industry, we can see that there were a few funds who sold off their entire stakes heading into Q3. Intriguingly, Irving Kahn’s Kahn Brothers said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, worth about $22.6 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund dumped about $18.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 5 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks similar to Hologic, Inc. (NASDAQ:HOLX). We will take a look at Franco-Nevada Corporation (NYSE:FNV), Cincinnati Financial Corporation (NASDAQ:CINF), Host Hotels and Resorts Inc (NYSE:HST), and Annaly Capital Management, Inc. (NYSE:NLY). All of these stocks’ market caps resemble HOLX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FNV 19 457607 -4
CINF 21 545563 -1
HST 27 576569 5
NLY 21 339026 5
Average 22 479691 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $480 million. That figure was $756 million in HOLX’s case. Host Hotels and Resorts Inc (NYSE:HST) is the most popular stock in this table. On the other hand Franco-Nevada Corporation (NYSE:FNV) is the least popular one with only 19 bullish hedge fund positions. Hologic, Inc. (NASDAQ:HOLX) 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 HOLX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HOLX were disappointed as the stock returned -9.2% 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.

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