Is Gamida Cell Ltd. (NASDAQ:GMDA) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Gamida Cell Ltd. (NASDAQ:GMDA) was in 6 hedge funds’ portfolios at the end of the third quarter of 2019. GMDA investors should pay attention to a decrease in enthusiasm from smart money of late. There were 7 hedge funds in our database with GMDA holdings at the end of the previous quarter. Our calculations also showed that GMDA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Kris Jenner of Rock Springs Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s take a gander at the new hedge fund action encompassing Gamida Cell Ltd. (NASDAQ:GMDA).
How have hedgies been trading Gamida Cell Ltd. (NASDAQ:GMDA)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in GMDA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, 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, Rock Springs Capital Management, managed by Kris Jenner, Gordon Bussard, Graham McPhail, holds the most valuable position in Gamida Cell Ltd. (NASDAQ:GMDA). Rock Springs Capital Management has a $4.3 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Biotechnology Value Fund, managed by Mark Lampert, which holds a $4.3 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism consist of Nathan Fischel’s DAFNA Capital Management, Anand Parekh’s Alyeska Investment Group and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Biotechnology Value Fund allocated the biggest weight to Gamida Cell Ltd. (NASDAQ:GMDA), around 0.45% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, dishing out 0.44 percent of its 13F equity portfolio to GMDA.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: EcoR1 Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified GMDA as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gamida Cell Ltd. (NASDAQ:GMDA) but similarly valued. We will take a look at Ring Energy Inc (NYSE:REI), Abeona Therapeutics Inc (NASDAQ:ABEO), Kaixin Auto Holdings (NASDAQ:KXIN), and Frequency Electronics, Inc. (NASDAQ:FEIM). This group of stocks’ market values resemble GMDA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REI | 8 | 2213 | -3 |
| ABEO | 15 | 32925 | -2 |
| KXIN | 3 | 203 | -1 |
| FEIM | 3 | 11359 | 0 |
| Average | 7.25 | 11675 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $11 million in GMDA’s case. Abeona Therapeutics Inc (NASDAQ:ABEO) is the most popular stock in this table. On the other hand Kaixin Auto Holdings (NASDAQ:KXIN) is the least popular one with only 3 bullish hedge fund positions. Gamida Cell Ltd. (NASDAQ:GMDA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on GMDA as the stock returned 18.2% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.