Hedge Funds Are Ditching Globus Medical Inc (GMED): Have They Uncovered Something You Haven’t?

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Globus Medical Inc (NYSE:GMED).

Globus Medical Inc (NYSE:GMED) was in 14 hedge funds’ portfolios at the end of September. GMED investors should be aware of a decrease in hedge fund sentiment lately. There were 20 hedge funds in our database with GMED positions at the end of the previous quarter. At the end of this article we will also compare GMED to other stocks including ACI Worldwide Inc (NASDAQ:ACIW), Alamos Gold Inc (NYSE:AGI), and Autohome Inc (ADR) (NYSE:ATHM) to get a better sense of its popularity.

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 Globus Medical Inc (NYSE:GMED)

Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 30% fall from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in GMED over the last 5 quarters, which shows extreme volatility. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Mitchell Blutt’s Consonance Capital Management has the largest position in Globus Medical Inc (NYSE:GMED), worth close to $42 million, amounting to 4% of its total 13F portfolio. Coming in second is Robert Joseph Caruso of Select Equity Group, with a $23.1 million position. Other hedge funds and institutional investors with similar optimism include Joel Greenblatt’s Gotham Asset Management, Ken Griffin’s Citadel Investment Group, and Steve Cohen’s Point72 Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Globus Medical Inc (NYSE:GMED) has gone through falling interest from the smart money, logic holds that there was a specific group of funds that elected to cut their entire stakes by the end of the third quarter. Interestingly, Amy Minella’s Cardinal Capital dropped the biggest stake of all the hedgies watched by Insider Monkey, comprising an estimated $17.9 million in stock. Robert B. Gillam’s fund, McKinley Capital Management, also cut its stock, about $7.4 million worth.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Globus Medical Inc (NYSE:GMED) but similarly valued. These stocks are ACI Worldwide Inc (NASDAQ:ACIW), Alamos Gold Inc (NYSE:AGI), Autohome Inc (ADR) (NYSE:ATHM), and AVX Corporation (NYSE:AVX). All of these stocks’ market caps are similar to GMED’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $116 million in GMED’s case. AVX Corporation (NYSE:AVX) is the most popular stock in this table. On the other hand ACI Worldwide Inc (NASDAQ:ACIW) is the least popular one with only 11 bullish hedge fund positions. Globus Medical Inc (NYSE:GMED) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AVX might be a better candidate to consider taking a long position in.

Disclosure: None