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

“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Gilead Sciences, Inc. (NASDAQ:GILD) and see how it was affected.

Gilead Sciences, Inc. (NASDAQ:GILD) has seen an increase in hedge fund sentiment in December though the overall trend is still negative. Our calculations also showed that GILD isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin CITADEL INVESTMENT GROUP

Let’s analyze the latest hedge fund action encompassing Gilead Sciences, Inc. (NASDAQ:GILD).

How have hedgies been trading Gilead Sciences, Inc. (NASDAQ:GILD)?

At Q4’s end, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. By comparison, 64 hedge funds held shares or bullish call options in GILD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

GILD_mar2019

Of the funds tracked by Insider Monkey, Cliff Asness’s AQR Capital Management has the largest position in Gilead Sciences, Inc. (NASDAQ:GILD), worth close to $542.3 million, corresponding to 0.6% of its total 13F portfolio. On AQR Capital Management’s heels is Renaissance Technologies, managed by Jim Simons, which holds a $337.1 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions contain Israel Englander’s Millennium Management, Noam Gottesman’s GLG Partners and Ken Griffin’s Citadel Investment Group.

With a general bullishness amongst the heavyweights, key money managers have jumped into Gilead Sciences, Inc. (NASDAQ:GILD) headfirst. Chiron Investment Management, managed by Ryan Caldwell, created the largest position in Gilead Sciences, Inc. (NASDAQ:GILD). Chiron Investment Management had $42.1 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe’s Voleon Capital also made a $21.9 million investment in the stock during the quarter. The following funds were also among the new GILD investors: Dmitry Balyasny’s Balyasny Asset Management, Nick Niell’s Arrowgrass Capital Partners, and Matthew Tewksbury’s Stevens Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Gilead Sciences, Inc. (NASDAQ:GILD) but similarly valued. These stocks are Starbucks Corporation (NASDAQ:SBUX), Booking Holdings Inc. (NASDAQ:BKNG), Caterpillar Inc. (NYSE:CAT), and Lockheed Martin Corporation (NYSE:LMT). 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
SBUX 42 3366976 9
BKNG 84 6437292 16
CAT 60 3130061 -3
LMT 42 1269393 6
Average 57 3550931 7

View table here if you experience formatting issues.

As you can see these stocks had an average of 57 hedge funds with bullish positions and the average amount invested in these stocks was $3551 million. That figure was $2885 million in GILD’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Starbucks Corporation (NASDAQ:SBUX) is the least popular one with only 42 bullish hedge fund positions. Gilead Sciences, Inc. (NASDAQ:GILD) is not the least popular stock in this group but hedge fund interest is still below average. 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately Gilead wasn’t in this group. Hedge funds that bet on GILD were disappointed as the stock returned 5.9% and underperformed the market by a large margin. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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