Should I Buy Hologic, Inc. (HOLX)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Hologic, Inc. (NASDAQ:HOLX).

Is Hologic, Inc. (NASDAQ:HOLX) ready to rally soon? Investors who are in the know were getting more bullish. The number of bullish hedge fund bets advanced by 9 lately. Hologic, Inc. (NASDAQ:HOLX) was in 41 hedge funds’ portfolios at the end of June. The all time high for this statistic is 50. Our calculations also showed that HOLX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 32 hedge funds in our database with HOLX holdings at the end of March.

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 79 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.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a look at the fresh hedge fund action encompassing Hologic, Inc. (NASDAQ:HOLX).

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

At the end of June, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards HOLX over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Hologic, Inc. (NASDAQ:HOLX), which was worth $149.2 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $100 million worth of shares. Arrowstreet Capital, Balyasny Asset Management, and Two Sigma Advisors 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 Otter Creek Management allocated the biggest weight to Hologic, Inc. (NASDAQ:HOLX), around 2.35% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, earmarking 2.03 percent of its 13F equity portfolio to HOLX.

As industrywide interest jumped, key money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in Hologic, Inc. (NASDAQ:HOLX). Balyasny Asset Management had $78.2 million invested in the company at the end of the quarter. Stephen DuBois’s Camber Capital Management also made a $44.4 million investment in the stock during the quarter. The other funds with brand new HOLX positions are Steven Boyd’s Armistice Capital, Brian Ashford-Russell and Tim Woolley’s Polar Capital, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hologic, Inc. (NASDAQ:HOLX) but similarly valued. We will take a look at Monolithic Power Systems, Inc. (NASDAQ:MPWR), Celanese Corporation (NYSE:CE), Diamondback Energy Inc (NASDAQ:FANG), United Airlines Holdings Inc (NASDAQ:UAL), Rollins, Inc. (NYSE:ROL), Zai Lab Limited (NASDAQ:ZLAB), and Nuance Communications Inc. (NASDAQ:NUAN). This group of stocks’ market caps resemble HOLX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MPWR 34 702043 2
CE 37 594932 1
FANG 38 443251 3
UAL 39 704030 1
ROL 30 610715 0
ZLAB 36 1029464 4
NUAN 72 5576065 15
Average 40.9 1380071 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.9 hedge funds with bullish positions and the average amount invested in these stocks was $1380 million. That figure was $977 million in HOLX’s case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand Rollins, Inc. (NYSE:ROL) is the least popular one with only 30 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. Our overall hedge fund sentiment score for HOLX is 47.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on HOLX as the stock returned 4.8% since the end of Q2 (through 10/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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