Here’s What Hedge Funds Think About Gilead Sciences, Inc. (GILD)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Gilead Sciences, Inc. (NASDAQ:GILD).

Gilead Sciences, Inc. (NASDAQ:GILD) was in 89 hedge funds’ portfolios at the end of December and the sentiment has remained almost flat over the quarter. There were 90 hedge funds in our database with GILD positions at the end of the previous quarter. At the end of this article we will also compare GILD to other stocks including PepsiCo, Inc. (NYSE:PEP), Comcast Corporation (NASDAQ:CMCSA), and Medtronic, Inc. (NYSE:MDT) to get a better sense of its popularity.

In the financial world, there are plenty of tools stock traders employ to size up stocks. A duo of the best tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outperform the broader indices by a solid amount (see the details here).

Gilead Sciences is one of the favorite biotech stocks among smart money investors. Among the funds tracked by Insider Monkey it is the most popular biotech company and the 89 funds that held shares at the end of September amassed $4.52 billion worth of stock, which represents around 3.10% of the company’s outstanding stock.

The stock has declined by nearly 15% over the last 52 weeks amid a broader market sell-off and turmoil in the biotech industry in particular, which was affected by scrutiny over drug-pricing policies. Nevertheless, Gilead last reported better-than-expected earnings of $3.32 per share, compared to estimates of $3.00 as the sales of its key products, Hepatitis C drugs Harvoni and Sovaldi registered strong sales in Japan during the fourth quarter. In this way, the company’s revenue surged to $8.51 billion in the last quarter, compared to $7.31 billion a year earlier and topped the expectations of $8.14 billion.

Gilead was also in the middle of the recent scrutiny of the biotech industry as the company, which currently controls 90% of the market for Hepatitis C treatments. The company was accused that the prices of its Sovaldi and Harvoni courses are too high, but it refuted the claims and said that it is working with patients that cannot afford to pay for the treatment and is committed to expand access to the drugs.

With all of this in mind, let’s go over the fresh action surrounding Gilead Sciences, Inc. (NASDAQ:GILD).

What have hedge funds been doing with Gilead Sciences, Inc. (NASDAQ:GILD)?

Heading into 2016, a total of 89 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -1% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D. E. Shaw’s D E Shaw has the most valuable position in Gilead Sciences, Inc. (NASDAQ:GILD), worth close to $457 million, comprising 0.7% of its total 13F portfolio. The second most bullish fund manager is Egerton Capital Limited, led by John Armitage, holding a $434.3 million position; 4.5% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions encompass Cliff Asness’s AQR Capital Management, Samuel Isaly’s OrbiMed Advisors and Donald Chiboucis’s Columbus Circle Investors.

Because Gilead Sciences, Inc. (NASDAQ:GILD) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedge funds that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Tony Chedraoui’s Tyrus Capital dumped the biggest stake of the 700 funds monitored by Insider Monkey, comprising an estimated $85.9 million in call options.. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dumped its call options., about $45.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Gilead Sciences, Inc. (NASDAQ:GILD). We will take a look at PepsiCo, Inc. (NYSE:PEP), Comcast Corporation (NASDAQ:CMCSA), Medtronic, Inc. (NYSE:MDT), and Cisco Systems, Inc. (NASDAQ:CSCO). This group of stocks’ market valuations resemble GILD’s market valuation.

As you can see these stocks had an average of 65 hedge funds with bullish positions and the average amount invested in these stocks was $5.47 billion. That figure was $4.52 billion in GILD’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand Medtronic, Inc. (NYSE:MDT) is the least popular one with only 57 bullish hedge fund positions. Compared to these stocks Gilead Sciences, Inc. (NASDAQ:GILD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.