Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Globus Medical Inc (NYSE:GMED).
Is Globus Medical Inc (NYSE:GMED) a marvelous investment today? Prominent investors are getting more optimistic. The number of bullish hedge fund positions advanced by 2 in recent months. Our calculations also showed that GMED isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GMED was in 21 hedge funds’ portfolios at the end of the third quarter of 2019. There were 19 hedge funds in our database with GMED holdings at the end of the previous quarter.
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.
Noam Gottesman of GLG Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the new hedge fund action regarding Globus Medical Inc (NYSE:GMED).
How are hedge funds trading Globus Medical Inc (NYSE:GMED)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in GMED over the last 17 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Globus Medical Inc (NYSE:GMED). AQR Capital Management has a $76 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Mitchell Blutt of Consonance Capital Management, with a $67.1 million position; 6.6% of its 13F portfolio is allocated to the company. Other peers that are bullish encompass Renaissance Technologies, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Globus Medical Inc (NYSE:GMED), around 6.64% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.19 percent of its 13F equity portfolio to GMED.
As one would reasonably expect, key money managers were leading the bulls’ herd. Consonance Capital Management, managed by Mitchell Blutt, established the biggest position in Globus Medical Inc (NYSE:GMED). Consonance Capital Management had $67.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $16.2 million investment in the stock during the quarter. The other funds with brand new GMED positions are Michael Hintze’s CQS Cayman LP, Steve Cohen’s Point72 Asset Management, and Brandon Haley’s Holocene Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to Globus Medical Inc (NYSE:GMED). We will take a look at First Horizon National Corporation (NYSE:FHN), TFS Financial Corporation (NASDAQ:TFSL), Texas Pacific Land Trust (NYSE:TPL), and Manpowergroup Inc (NYSE:MAN). This group of stocks’ market caps are closest to GMED’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FHN | 31 | 192889 | 8 |
| TFSL | 8 | 157723 | 3 |
| TPL | 12 | 1254260 | -4 |
| MAN | 19 | 377209 | 2 |
| Average | 17.5 | 495520 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $496 million. That figure was $259 million in GMED’s case. First Horizon National Corporation (NYSE:FHN) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 8 bullish hedge fund positions. Globus Medical Inc (NYSE:GMED) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on GMED, though not to the same extent, as the stock returned 9.4% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
