Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH).
Is GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) an excellent investment today? Investors who are in the know are in an optimistic mood. The number of long hedge fund bets jumped up by 7 lately. 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 Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), BlackRock Credit All Inc Trust IV (NYSE:BTZ), and Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Hedge fund activity in GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH)
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 41% jump from the previous quarter. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, holds the biggest position in GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH). Scopia Capital has a $250.2 million position in the stock, comprising 4.4% of its 13F portfolio. On Scopia Capital’s heels is Deerfield Management, led by James E. Flynn, holding a $133.9 million position; 6.2% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism encompass Andreas Halvorsen’s Viking Global, Jeremy Green’s Redmile Group and Kris Jenner, Gordon Bussard, and Graham McPhail’s Rock Springs Capital Management.
As industry-wide interest jumped, specific money managers were breaking ground themselves. Redmile Group created the biggest position in GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH). Redmile Group had $72.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $20.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Behzad Aghazadeh’s venBio Select Advisor, Ken Greenberg and David Kim’s Ghost Tree Capital, and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) but similarly valued. We will take a look at Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), BlackRock Credit All Inc Trust IV (NYSE:BTZ), Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL), and Brink’S Co (NYSE:BCO). This group of stocks’ market valuations are closest to GWPH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARIA | 29 | 563755 | 2 |
| BTZ | 3 | 1574 | 1 |
| GGAL | 16 | 151147 | 2 |
| BCO | 23 | 429087 | -1 |
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $286 million. That figure was $801 million in GWPH’s case. Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) is the most popular stock in this table. On the other hand BlackRock Credit All Inc Trust IV (NYSE:BTZ) is the least popular one with only 3 bullish hedge fund positions. GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) is not the most popular stock in this group but hedge fund interest is still above average. Considering the fact that GWPH has more money invested in it than any of the other stocks on the table, as well as the fact that it enjoyed the largest surge in ownership during the third quarter, we like what we see from hedge funds on this stock and consider it a candidate worth looking into deeper.
Disclosure: None
