“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Halozyme Therapeutics, Inc. (NASDAQ:HALO).
Halozyme Therapeutics, Inc. (NASDAQ:HALO) shareholders have witnessed an increase in hedge fund interest in recent months. Our calculations also showed that HALO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the recent hedge fund action encompassing Halozyme Therapeutics, Inc. (NASDAQ:HALO).
How are hedge funds trading Halozyme Therapeutics, Inc. (NASDAQ:HALO)?
Heading into the fourth quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in HALO over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the largest position in Halozyme Therapeutics, Inc. (NASDAQ:HALO). Iridian Asset Management has a $69.2 million position in the stock, comprising 1.1% of its 13F portfolio. The second largest stake is held by Ken Fisher of Fisher Asset Management, with a $18.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Noam Gottesman’s GLG Partners and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to Halozyme Therapeutics, Inc. (NASDAQ:HALO), around 1.6% of its portfolio. Iridian Asset Management is also relatively very bullish on the stock, designating 1.08 percent of its 13F equity portfolio to HALO.
Consequently, key money managers were leading the bulls’ herd. Sio Capital, managed by Michael Castor, created the most outsized position in Halozyme Therapeutics, Inc. (NASDAQ:HALO). Sio Capital had $5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $4.9 million investment in the stock during the quarter. The other funds with brand new HALO positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Mike Vranos’s Ellington, and David Harding’s Winton Capital Management.
Let’s check out hedge fund activity in other stocks similar to Halozyme Therapeutics, Inc. (NASDAQ:HALO). We will take a look at Independent Bank Group Inc (NASDAQ:IBTX), Alarm.com Holdings, Inc. (NASDAQ:ALRM), Cadence Bancorporation (NYSE:CADE), and Greif, Inc. (NYSE:GEF). This group of stocks’ market valuations resemble HALO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBTX | 12 | 100233 | 3 |
| ALRM | 18 | 162049 | -1 |
| CADE | 20 | 105054 | 2 |
| GEF | 14 | 76629 | -7 |
| Average | 16 | 110991 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $154 million in HALO’s case. Cadence Bancorporation (NYSE:CADE) is the most popular stock in this table. On the other hand Independent Bank Group Inc (NASDAQ:IBTX) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Halozyme Therapeutics, Inc. (NASDAQ:HALO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on HALO as the stock returned 25% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
