Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by successful investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY) was in 9 hedge funds’ portfolios at the end of the third quarter of 2016. RDY has seen an increase in support from the world’s most successful money managers recently. There were 7 hedge funds in our database with RDY holdings at the end of the previous quarter. 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 iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB), Packaging Corp Of America (NYSE:PKG), and Torchmark Corporation (NYSE:TMK) to gather more data points.
Follow Dr Reddys Laboratories Ltd (NYSE:RDY)
Follow Dr Reddys Laboratories Ltd (NYSE:RDY)
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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With all of this in mind, let’s go over the key action regarding Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY).
What does the smart money think about Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the second quarter of 2016. On the other hand, there were a total of 9 hedge funds with a bullish position in RDY at the beginning of this year. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the largest position in Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY), worth close to $264.5 million, comprising 0.5% of its total 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $129.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism include Simon Sadler’s Segantii Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners and Gifford Combs’s Dalton Investments. 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.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. LMR Partners, led by Ben Levine, Andrew Manuel and Stefan Renold, created the most valuable position in Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY). LMR Partners had $10.3 million invested in the company at the end of the quarter. Gifford Combs’s Dalton Investments also made a $2.4 million investment in the stock during the quarter. The following funds were also among the new RDY investors: Krishen Sud’s Sivik Global Healthcare and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY) but similarly valued. These stocks are iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB), Packaging Corp Of America (NYSE:PKG), Torchmark Corporation (NYSE:TMK), and Seattle Genetics, Inc. (NASDAQ:SGEN). This group of stocks’ market caps match RDY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBB | 23 | 237514 | 5 |
| PKG | 21 | 153584 | 1 |
| TMK | 19 | 614374 | -1 |
| SGEN | 23 | 2632735 | 3 |
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $910 million. That figure was $422 million in RDY’s case. iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) is the most popular stock in this table. On the other hand Torchmark Corporation (NYSE:TMK) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY) is even less popular than TMK. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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