Should I Avoid Guardant Health, Inc. (GH)?

In this article we will check out the progression of hedge fund sentiment towards Guardant Health, Inc. (NASDAQ:GH) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Guardant Health, Inc. (NASDAQ:GH) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 52. GH has experienced a decrease in activity from the world’s largest hedge funds in recent months. There were 49 hedge funds in our database with GH holdings at the end of June. Our calculations also showed that GH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a glance at the latest hedge fund action surrounding Guardant Health, Inc. (NASDAQ:GH).

Philippe Laffont of Coatue Management

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

At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -37% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GH over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Viking Global, managed by Andreas Halvorsen, holds the number one position in Guardant Health, Inc. (NASDAQ:GH). Viking Global has a $611.9 million position in the stock, comprising 1.7% of its 13F portfolio. Sitting at the No. 2 spot is Coatue Management, managed by Philippe Laffont, which holds a $350.7 million position; 1.4% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include OrbiMed Advisors, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Doug Silverman and Alexander Klabin’s Senator Investment Group. In terms of the portfolio weights assigned to each position Iron Triangle Partners allocated the biggest weight to Guardant Health, Inc. (NASDAQ:GH), around 3.41% of its 13F portfolio. Rhenman & Partners Asset Management is also relatively very bullish on the stock, setting aside 1.8 percent of its 13F equity portfolio to GH.

Due to the fact that Guardant Health, Inc. (NASDAQ:GH) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Glen Kacher’s Light Street Capital dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising about $63.6 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $41.8 million worth. These moves are interesting, as total hedge fund interest fell by 18 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Guardant Health, Inc. (NASDAQ:GH) but similarly valued. These stocks are Agnico Eagle Mines Limited (NYSE:AEM), Campbell Soup Company (NYSE:CPB), LPL Financial Holdings Inc (NASDAQ:LPLA), Jones Lang LaSalle Inc (NYSE:JLL), Iron Mountain Incorporated (NYSE:IRM), Enel Americas S.A. (NYSE:ENIA), and Tenaris S.A. (NYSE:TS). This group of stocks’ market caps match GH’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $706 million. That figure was $1515 million in GH’s case. LPL Financial Holdings Inc (NASDAQ:LPLA) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 9 bullish hedge fund positions. Guardant Health, Inc. (NASDAQ:GH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GH is 44.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately GH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GH were disappointed as the stock returned -15.9% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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