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

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2018) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Hologic, Inc. (NASDAQ:HOLX).

Hologic, Inc. (NASDAQ:HOLX) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that HOLX isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

GLENVIEW CAPITAL

Let’s view the key hedge fund action regarding Hologic, Inc. (NASDAQ:HOLX).

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

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HOLX over the last 13 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

HOLX_dec2018

The largest stake in Hologic, Inc. (NASDAQ:HOLX) was held by Glenview Capital, which reported holding $341.6 million worth of stock at the end of September. It was followed by D E Shaw with a $72.7 million position. Other investors bullish on the company included GLG Partners, Balyasny Asset Management, and Two Sigma Advisors.

Due to the fact that Hologic, Inc. (NASDAQ:HOLX) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of funds that slashed their positions entirely heading into Q3. Interestingly, Christopher James’s Partner Fund Management dropped the largest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $75.2 million in stock, and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management was right behind this move, as the fund said goodbye to about $15.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 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 Neurocrine Biosciences, Inc. (NASDAQ:NBIX), The Gap Inc. (NYSE:GPS), Huntington Ingalls Industries Inc (NYSE:HII), and PVH Corp (NYSE:PVH). All of these stocks’ market caps are closest to HOLX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NBIX 39 1287114 10
GPS 29 201712 1
HII 26 746339 -1
PVH 44 1292262 8
Average 34.5 881857 4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $882 million. That figure was $687 million in HOLX’s case. PVH Corp (NYSE:PVH) is the most popular stock in this table. On the other hand Huntington Ingalls Industries Inc (NYSE:HII) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Hologic, Inc. (NASDAQ:HOLX) is even less popular than HII. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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