Were Hedge Funds Right About Myriad Genetics, Inc. (MYGN)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Myriad Genetics, Inc. (NASDAQ:MYGN).

Myriad Genetics, Inc. (NASDAQ:MYGN) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that MYGN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as O-I Glass, Inc. (NYSE:OI), Federal Signal Corporation (NYSE:FSS), and Sorrento Therapeutics Inc (NASDAQ:SRNE) to gather more data points.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. With all of this in mind let’s take a peek at the fresh hedge fund action encompassing Myriad Genetics, Inc. (NASDAQ:MYGN).

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

At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in MYGN a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in Myriad Genetics, Inc. (NASDAQ:MYGN) was held by Camber Capital Management, which reported holding $91.4 million worth of stock at the end of December. It was followed by Partner Fund Management with a $82.8 million position. Other investors bullish on the company included D E Shaw, Glenview Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Camber Capital Management allocated the biggest weight to Myriad Genetics, Inc. (NASDAQ:MYGN), around 3.13% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, earmarking 2.53 percent of its 13F equity portfolio to MYGN.

Because Myriad Genetics, Inc. (NASDAQ:MYGN) has faced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies that decided to sell off their entire stakes heading into Q2. At the top of the heap, Renaissance Technologies sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at close to $1 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund said goodbye to about $0.5 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Myriad Genetics, Inc. (NASDAQ:MYGN) but similarly valued. We will take a look at O-I Glass, Inc. (NYSE:OI), Federal Signal Corporation (NYSE:FSS), Sorrento Therapeutics Inc (NASDAQ:SRNE), E2open Parent Holdings, Inc. (NYSE:ETWO), The ODP Corporation (NASDAQ:ODP), Hub Group Inc (NASDAQ:HUBG), and BancFirst Corporation (NASDAQ:BANF). This group of stocks’ market valuations resemble MYGN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $292 million. That figure was $412 million in MYGN’s case. E2open Parent Holdings, Inc. (NYSE:ETWO) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 4 bullish hedge fund positions. Myriad Genetics, Inc. (NASDAQ:MYGN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MYGN is 41.5. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately MYGN wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MYGN investors were disappointed as the stock returned 4.5% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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