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Should You Buy Genomic Health, Inc. (GHDX)?

Insider Monkey finished processing more than 700 13F filings made by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th. What do these smart investors think about Genomic Health, Inc. (NASDAQ:GHDX)?

Genomic Health, Inc. (NASDAQ:GHDX) has seen an increase in activity from the world’s largest hedge funds of late. GHDX was in 18 hedge funds’ portfolios at the end of the third quarter of 2018. There were 16 hedge funds in our database with GHDX holdings at the end of the previous quarter. Our calculations also showed that GHDX 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 18 percentage points since May 2014 through December 3, 2018 (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.

Felix Baker - Baker Bros.

Let’s take a look at the fresh hedge fund action regarding Genomic Health, Inc. (NASDAQ:GHDX).

Hedge fund activity in Genomic Health, Inc. (NASDAQ:GHDX)

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GHDX over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

GHDX_dec2018

Among these funds, Baker Bros. Advisors held the most valuable stake in Genomic Health, Inc. (NASDAQ:GHDX), which was worth $968.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $125.2 million worth of shares. Moreover, Millennium Management, GLG Partners, and Citadel Investment Group were also bullish on Genomic Health, Inc. (NASDAQ:GHDX), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, some big names were breaking ground themselves. PDT Partners, managed by Peter Muller, initiated the most valuable position in Genomic Health, Inc. (NASDAQ:GHDX). PDT Partners had $2.3 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $1.1 million investment in the stock during the quarter. The other funds with brand new GHDX positions are Joel Greenblatt’s Gotham Asset Management and D. E. Shaw’s D E Shaw.

Let’s go over hedge fund activity in other stocks similar to Genomic Health, Inc. (NASDAQ:GHDX). We will take a look at Itron, Inc. (NASDAQ:ITRI), Moelis & Company (NYSE:MC), ProAssurance Corporation (NYSE:PRA), and Urban Edge Properties (NYSE:UE). This group of stocks’ market valuations are similar to GHDX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ITRI 17 624732 4
MC 20 80299 7
PRA 13 211984 -1
UE 12 75334 2
Average 15.5 248087 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $1.24 billion in GHDX’s case. Moelis & Company (NYSE:MC) is the most popular stock in this table. On the other hand Urban Edge Properties (NYSE:UE) is the least popular one with only 12 bullish hedge fund positions. Genomic Health, Inc. (NASDAQ:GHDX) 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. In this regard MC might be a better candidate to consider a long position.

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

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