Were Hedge Funds Illusioned With Guardant Health, Inc. (GH)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Guardant Health, Inc. (NASDAQ:GH) and determine whether hedge funds skillfully traded this stock.

Is Guardant Health, Inc. (NASDAQ:GH) worth your attention right now? Prominent investors were getting less optimistic. The number of long hedge fund positions retreated by 18 recently. 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. Our calculations also showed that GH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 49 hedge funds in our database with GH positions at the end of the second quarter.

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 key 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?

Heading into the fourth quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -37% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GH over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Viking Global, managed by Andreas Halvorsen, holds the biggest 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. On Viking Global’s heels is Coatue Management, managed by Philippe Laffont, which holds a $350.7 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Some other peers that are bullish consist of 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, dishing out 1.8 percent of its 13F equity portfolio to GH.

Due to the fact that Guardant Health, Inc. (NASDAQ:GH) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of money managers who were dropping their positions entirely heading into Q4. Intriguingly, Glen Kacher’s Light Street Capital sold off the largest stake of the 750 funds watched by Insider Monkey, valued at about $63.6 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $41.8 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 18 funds heading into Q4.

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. We will take a look at 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 values are similar to GH’s market value.

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 29.6% in 2021 and beat the market again by 3.6 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 -44.4% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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