Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Hologic, Inc. (NASDAQ:HOLX) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is Hologic, Inc. (NASDAQ:HOLX) undervalued? Prominent investors are becoming hopeful. The number of long hedge fund bets went up by 5 lately. Our calculations also showed that HOLX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Larry Robbins of Glenview Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding Hologic, Inc. (NASDAQ:HOLX).
Hedge fund activity in Hologic, Inc. (NASDAQ:HOLX)
At Q4’s end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the third quarter of 2019. On the other hand, there were a total of 28 hedge funds with a bullish position in HOLX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Hologic, Inc. (NASDAQ:HOLX) was held by Glenview Capital, which reported holding $525.6 million worth of stock at the end of September. It was followed by Healthcor Management LP with a $128.6 million position. Other investors bullish on the company included D E Shaw, Two Sigma Advisors, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to Hologic, Inc. (NASDAQ:HOLX), around 5.63% of its 13F portfolio. Glenview Capital is also relatively very bullish on the stock, setting aside 4.6 percent of its 13F equity portfolio to HOLX.
Now, specific money managers were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, initiated the biggest position in Hologic, Inc. (NASDAQ:HOLX). Alyeska Investment Group had $35.9 million invested in the company at the end of the quarter. Michael Rockefeller and Karl Kroeker’s Woodline Partners also made a $15.7 million investment in the stock during the quarter. The following funds were also among the new HOLX investors: Robert B. Gillam’s McKinley Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Matthew L Pinz’s Pinz Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hologic, Inc. (NASDAQ:HOLX) but similarly valued. We will take a look at Okta, Inc. (NASDAQ:OKTA), Akamai Technologies, Inc. (NASDAQ:AKAM), Carvana Co. (NYSE:CVNA), and Sun Communities Inc (NYSE:SUI). This group of stocks’ market valuations match HOLX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OKTA | 39 | 996171 | -13 |
| AKAM | 36 | 790927 | 5 |
| CVNA | 53 | 2726394 | 3 |
| SUI | 31 | 399362 | 13 |
| Average | 39.75 | 1228214 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $1228 million. That figure was $1500 million in HOLX’s case. Carvana Co. (NYSE:CVNA) is the most popular stock in this table. On the other hand Sun Communities Inc (NYSE:SUI) is the least popular one with only 31 bullish hedge fund positions. Hologic, Inc. (NASDAQ:HOLX) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but beat the market by 1.9 percentage points. Unfortunately HOLX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HOLX were disappointed as the stock returned -15.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
