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Were Hedge Funds Right About Buying Gilead Sciences, Inc. (GILD)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Gilead Sciences, Inc. (NASDAQ:GILD) and determine whether the smart money was really smart about this stock.

Gilead Sciences, Inc. (NASDAQ:GILD) has experienced an increase in hedge fund interest in recent months. Our calculations also showed that GILD isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the 21st century investor’s toolkit there are tons of formulas stock market investors can use to evaluate their stock investments. Some of the less known formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top investment managers can beat the market by a superb amount (see the details here).

Peter Kolchinsky of RA Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the latest hedge fund action encompassing Gilead Sciences, Inc. (NASDAQ:GILD).

Hedge fund activity in Gilead Sciences, Inc. (NASDAQ:GILD)

At Q1’s end, a total of 76 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GILD over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Gilead Sciences, Inc. (NASDAQ:GILD), with a stake worth $936.8 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $433.4 million. Ariel Investments, Citadel Investment Group, and Diamond Hill Capital 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 Keywise Capital Management allocated the biggest weight to Gilead Sciences, Inc. (NASDAQ:GILD), around 16.7% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, dishing out 6.29 percent of its 13F equity portfolio to GILD.

As industrywide interest jumped, some big names have jumped into Gilead Sciences, Inc. (NASDAQ:GILD) headfirst. Keywise Capital Management, managed by Fang Zheng, established the largest position in Gilead Sciences, Inc. (NASDAQ:GILD). Keywise Capital Management had $61.6 million invested in the company at the end of the quarter. Glen Kacher’s Light Street Capital also made a $52.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Kolchinsky’s RA Capital Management, Louis Bacon’s Moore Global Investments, and George McCabe’s Portolan Capital Management.

Let’s now review hedge fund activity in other stocks similar to Gilead Sciences, Inc. (NASDAQ:GILD). We will take a look at Texas Instruments Incorporated (NASDAQ:TXN), BHP Group (NYSE:BHP), Linde plc (NYSE:LIN), and Citigroup Inc. (NYSE:C). This group of stocks’ market caps are similar to GILD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TXN 46 1744576 -4
BHP 18 460616 -2
LIN 53 3350656 6
C 86 5494249 -12
Average 50.75 2762524 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.75 hedge funds with bullish positions and the average amount invested in these stocks was $2763 million. That figure was $2833 million in GILD’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 18 bullish hedge fund positions. Gilead Sciences, Inc. (NASDAQ:GILD) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately GILD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GILD were disappointed as the stock returned 1.9% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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