Did Hedge Funds Make The Right Call On Grifols SA (GRFS) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Grifols SA (NASDAQ:GRFS) based on that data and determine whether they were really smart about the stock.

Grifols SA (NASDAQ:GRFS) was in 23 hedge funds’ portfolios at the end of March. GRFS has experienced an increase in hedge fund interest lately. There were 21 hedge funds in our database with GRFS positions at the end of the previous quarter. Our calculations also showed that GRFS 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let’s take a gander at the latest hedge fund action encompassing Grifols SA (NASDAQ:GRFS).

What does smart money think about Grifols SA (NASDAQ:GRFS)?

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in GRFS over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Grifols SA (NASDAQ:GRFS) was held by Ako Capital, which reported holding $266.7 million worth of stock at the end of September. It was followed by Farallon Capital with a $62.7 million position. Other investors bullish on the company included Whitebox Advisors, Nitorum Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Soleus Capital allocated the biggest weight to Grifols SA (NASDAQ:GRFS), around 9.07% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, designating 5.62 percent of its 13F equity portfolio to GRFS.

Consequently, some big names have jumped into Grifols SA (NASDAQ:GRFS) headfirst. Nitorum Capital, managed by Seth Rosen, established the most valuable position in Grifols SA (NASDAQ:GRFS). Nitorum Capital had $53.6 million invested in the company at the end of the quarter. Ross Turner’s Pelham Capital also initiated a $13.4 million position during the quarter. The other funds with brand new GRFS positions are Michael Hintze’s CQS Cayman LP, Dmitry Balyasny’s Balyasny Asset Management, and Greg Eisner’s Engineers Gate Manager.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Grifols SA (NASDAQ:GRFS) but similarly valued. We will take a look at Genmab A/S (NASDAQ:GMAB), Align Technology, Inc. (NASDAQ:ALGN), Teleflex Incorporated (NYSE:TFX), and Avangrid, Inc. (NYSE:AGR). This group of stocks’ market values match GRFS’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $634 million. That figure was $700 million in GRFS’s case. Align Technology, Inc. (NASDAQ:ALGN) is the most popular stock in this table. On the other hand Genmab A/S (NASDAQ:GMAB) is the least popular one with only 14 bullish hedge fund positions. Grifols SA (NASDAQ:GRFS) 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 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately GRFS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GRFS investors were disappointed as the stock returned -9.4% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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