How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding GlycoMimetics, Inc. (NASDAQ:GLYC).
Hedge fund interest in GlycoMimetics, Inc. (NASDAQ:GLYC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare GLYC to other stocks including Financial Institutions, Inc. (NASDAQ:FISI), Vishay Precision Group Inc (NYSE:VPG), and Osmotica Pharmaceuticals plc (NASDAQ:OSMT) to get a better sense of its popularity.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s view the recent hedge fund action surrounding GlycoMimetics, Inc. (NASDAQ:GLYC).
How are hedge funds trading GlycoMimetics, Inc. (NASDAQ:GLYC)?
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GLYC over the last 14 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Redmile Group was the largest shareholder of GlycoMimetics, Inc. (NASDAQ:GLYC), with a stake worth $18.7 million reported as of the end of December. Trailing Redmile Group was Citadel Investment Group, which amassed a stake valued at $7.5 million. GLG Partners, Hudson Bay Capital Management, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as GlycoMimetics, Inc. (NASDAQ:GLYC) has witnessed declining sentiment from the smart money, logic holds that there were a few hedgies that slashed their full holdings last quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group said goodbye to the largest stake of the 700 funds tracked by Insider Monkey, valued at close to $6.5 million in stock. Ken Greenberg and David Kim’s fund, Ghost Tree Capital, also dumped its stock, about $5.8 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as GlycoMimetics, Inc. (NASDAQ:GLYC) but similarly valued. We will take a look at Financial Institutions, Inc. (NASDAQ:FISI), Vishay Precision Group Inc (NYSE:VPG), Osmotica Pharmaceuticals plc (NASDAQ:OSMT), and Kimball Electronics Inc (NASDAQ:KE). This group of stocks’ market valuations are closest to GLYC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FISI | 10 | 35681 | -2 |
| VPG | 13 | 114264 | -2 |
| OSMT | 9 | 32627 | 9 |
| KE | 7 | 24598 | -2 |
| Average | 9.75 | 51793 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $38 million in GLYC’s case. Vishay Precision Group Inc (NYSE:VPG) is the most popular stock in this table. On the other hand Kimball Electronics Inc (NASDAQ:KE) is the least popular one with only 7 bullish hedge fund positions. GlycoMimetics, Inc. (NASDAQ:GLYC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on GLYC as the stock returned 31.6% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
