Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Is GlaxoSmithKline plc (ADR) (NYSE:GSK) worth your attention right now? Prominent investors are becoming more confident. The number of long hedge fund positions increased by 2 lately. At the end of this article, we will also compare GlaxoSmithKline plc (ADR) (NYSE:GSK) to other stocks including NIKE, Inc. (NYSE:NKE), Lloyds Banking Group PLC (ADR) (NYSE:LYG), and BHP Billiton plc (ADR) (NYSE:BBL) to get a better sense of its popularity.
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According to most stock holders, hedge funds are viewed as underperforming, outdated investment vehicles of yesteryear. While there are over 8000 funds trading today, our experts look at the leaders of this group, approximately 700 funds. These investment experts command the lion’s share of all hedge funds’ total capital, and by watching their best stock picks, Insider Monkey has unearthed a number of investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s review the new action surrounding GlaxoSmithKline plc (ADR) (NYSE:GSK).
How are hedge funds trading GlaxoSmithKline plc (ADR) (NYSE:GSK)?
At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 6% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the most valuable position in GlaxoSmithKline plc (ADR) (NYSE:GSK), worth close to $443.3 million, comprising 0.9% of its total 13F portfolio. The second most bullish fund manager is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $124.7 million position; 0.6% of its 13F portfolio is allocated to the company. The remaining hedge funds and institutional investors that are bullish consist of James E. Flynn’s Deerfield Management, Renaissance Technologies, and John Osterweis’ Osterweis Capital Management.
With a general bullishness amongst the heavyweights, specific money managers have jumped into GlaxoSmithKline plc (ADR) (NYSE:GSK) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the most outsized position in GlaxoSmithKline plc (ADR) (NYSE:GSK). Adage Capital Management had $50 million invested in the company at the end of the quarter. Sanford J. Colen’s Apex Capital also made a $21.1 million investment in the stock during the quarter. The other funds with brand new GSK positions are Steven Boyd’s Armistice Capital, Glenn Russell Dubin’s Highbridge Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now take a look at the hedge fund activity in other stocks – not necessarily in the same industry as GlaxoSmithKline plc (ADR) (NYSE:GSK) but similarly valued. We will take a look at NIKE, Inc. (NYSE:NKE), Lloyds Banking Group PLC (ADR) (NYSE:LYG), BHP Billiton plc (ADR) (NYSE:BBL), and AstraZeneca plc (ADR) (NYSE:AZN). All of these stocks’ market caps are closest to GlaxoSmithKline plc (ADR) (NYSE:GSK)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NKE | 59 | 4490275 | 2 |
| LYG | 8 | 402535 | -5 |
| BBL | 4 | 82863 | -2 |
| AZN | 18 | 401752 | -2 |
As you can see, these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $1.34 billion. That figure was $1.02 billion in GlaxoSmithKline plc (ADR) (NYSE:GSK)’s case. NIKE, Inc. (NYSE:NKE) is the most popular stock in this table. On the other hand, BHP Billiton plc (ADR) (NYSE:BBL) is the least popular one with only 4 bullish hedge fund positions. GlaxoSmithKline plc (ADR) (NYSE:GSK) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NIKE, Inc. (NYSE:NKE) might be a better candidate to consider a long position.
