Were Hedge Funds Right About Flocking Into GW Pharmaceuticals plc (GWPH) ?

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not GW Pharmaceuticals plc (NASDAQ:GWPH) makes for a good investment right now.

GW Pharmaceuticals plc (NASDAQ:GWPH) was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2018. GWPH shareholders have witnessed an increase in support from the world’s most elite money managers lately. There were 18 hedge funds in our database with GWPH positions at the end of the previous quarter. Our calculations also showed that gwph 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeremy Mindich - Scopia Capital

We’re going to review the new hedge fund action regarding GW Pharmaceuticals plc (NASDAQ:GWPH).

What does the smart money think about GW Pharmaceuticals plc (NASDAQ:GWPH)?

Heading into the first quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from the second quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in GWPH a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds With GWPH Positions

More specifically, Scopia Capital was the largest shareholder of GW Pharmaceuticals plc (NASDAQ:GWPH), with a stake worth $131 million reported as of the end of September. Trailing Scopia Capital was Rock Springs Capital Management, which amassed a stake valued at $58.4 million. Citadel Investment Group, Baker Bros. Advisors, and Point72 Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names were leading the bulls’ herd. Millennium Management, managed by Israel Englander, assembled the biggest position in GW Pharmaceuticals plc (NASDAQ:GWPH). Millennium Management had $15.7 million invested in the company at the end of the quarter. Michael Castor’s Sio Capital also initiated a $8.2 million position during the quarter. The other funds with brand new GWPH positions are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Dmitry Balyasny’s Balyasny Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s also examine hedge fund activity in other stocks similar to GW Pharmaceuticals plc (NASDAQ:GWPH). These stocks are Louisiana-Pacific Corporation (NYSE:LPX), Macquarie Infrastructure Corporation (NYSE:MIC), Cushman & Wakefield plc (NYSE:CWK), and Manchester United PLC (NYSE:MANU). This group of stocks’ market values are closest to GWPH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LPX 31 426583 3
MIC 28 243274 3
CWK 13 142027 -2
MANU 9 61678 1
Average 20.25 218391 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $369 million in GWPH’s case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 9 bullish hedge fund positions. GW Pharmaceuticals plc (NASDAQ:GWPH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on GWPH as the stock returned 66.3% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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