Is GKOS A Good Stock To Buy Now?

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. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. What do these smart investors think about Glaukos Corporation (NYSE:GKOS)?

Is GKOS a good stock to buy now? The smart money was in a pessimistic mood. The number of bullish hedge fund positions fell by 3 recently. Glaukos Corporation (NYSE:GKOS) was in 15 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 21. Our calculations also showed that GKOS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 S&P 500 ETFs by more than 66 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

James E. Flynn of Deerfield Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a gander at the new hedge fund action encompassing Glaukos Corporation (NYSE:GKOS).

Do Hedge Funds Think GKOS Is A Good Stock To Buy Now?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GKOS over the last 21 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Deerfield Management held the most valuable stake in Glaukos Corporation (NYSE:GKOS), which was worth $34.4 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $25.3 million worth of shares. Great Point Partners, Adage Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Great Point Partners allocated the biggest weight to Glaukos Corporation (NYSE:GKOS), around 1.99% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, setting aside 0.84 percent of its 13F equity portfolio to GKOS.

Since Glaukos Corporation (NYSE:GKOS) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few hedgies that elected to cut their positions entirely by the end of the third quarter. Interestingly, Samuel Isaly’s OrbiMed Advisors sold off the biggest investment of the 750 funds tracked by Insider Monkey, worth close to $46.5 million in stock. Stephen DuBois’s fund, Camber Capital Management, also cut its stock, about $28 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Glaukos Corporation (NYSE:GKOS) but similarly valued. These stocks are WESCO International, Inc. (NYSE:WCC), LivaNova PLC (NASDAQ:LIVN), Atlas Corp. (NYSE:ATCO), VEON Ltd. (NASDAQ:VEON), F.N.B. Corp (NYSE:FNB), Central Garden & Pet Co (NASDAQ:CENT), and 2U Inc (NASDAQ:TWOU). All of these stocks’ market caps are similar to GKOS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $126 million in GKOS’s case. WESCO International, Inc. (NYSE:WCC) is the most popular stock in this table. On the other hand VEON Ltd. (NASDAQ:VEON) is the least popular one with only 8 bullish hedge fund positions. Glaukos Corporation (NYSE:GKOS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GKOS is 40.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on GKOS as the stock returned 37.3% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.