In this article we will check out the progression of hedge fund sentiment towards Gilead Sciences, Inc. (NASDAQ:GILD) 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.
Is Gilead Sciences, Inc. (NASDAQ:GILD) the right investment to pursue these days? Hedge funds were getting less optimistic. The number of long hedge fund positions retreated by 11 lately. Gilead Sciences, Inc. (NASDAQ:GILD) was in 54 hedge funds’ portfolios at the end of June. The all time high for this statistic is 93. Our calculations also showed that GILD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 65 hedge funds in our database with GILD holdings at the end of March.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 79 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.
John Rogers of Ariel Investments
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. 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. 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 homepage. Keeping this in mind let’s take a glance at the new hedge fund action regarding Gilead Sciences, Inc. (NASDAQ:GILD).
Do Hedge Funds Think GILD Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GILD over the last 24 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the biggest position in Gilead Sciences, Inc. (NASDAQ:GILD), worth close to $347.6 million, accounting for 0.4% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $204.8 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Ric Dillon’s Diamond Hill Capital, Alex Denner’s Sarissa Capital Management and John W. Rogers’s Ariel Investments. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Gilead Sciences, Inc. (NASDAQ:GILD), around 14.77% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, setting aside 10.29 percent of its 13F equity portfolio to GILD.
Since Gilead Sciences, Inc. (NASDAQ:GILD) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there exists a select few money managers who sold off their full holdings by the end of the second quarter. It’s worth mentioning that Brandon Haley’s Holocene Advisors cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $131.7 million in stock. Steve Cohen’s fund, Point72 Asset Management, also sold off its stock, about $117.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 11 funds by the end of the second quarter.
Let’s check out hedge fund activity in other stocks similar to Gilead Sciences, Inc. (NASDAQ:GILD). These stocks are General Motors Company (NYSE:GM), U.S. Bancorp (NYSE:USB), Automatic Data Processing (NASDAQ:ADP), Crown Castle International Corp. (NYSE:CCI), ConocoPhillips (NYSE:COP), The TJX Companies, Inc. (NYSE:TJX), and Cigna Corporation (NYSE:CI). This group of stocks’ market caps are closest to GILD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GM | 86 | 7414862 | 0 |
| USB | 41 | 8305634 | -2 |
| ADP | 41 | 3018791 | -1 |
| CCI | 42 | 2093903 | -1 |
| COP | 50 | 1158596 | -1 |
| TJX | 56 | 2387336 | -7 |
| CI | 63 | 2807451 | 10 |
| Average | 54.1 | 3883796 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 54.1 hedge funds with bullish positions and the average amount invested in these stocks was $3884 million. That figure was $1733 million in GILD’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand U.S. Bancorp (NYSE:USB) is the least popular one with only 41 bullish hedge fund positions. Gilead Sciences, Inc. (NASDAQ:GILD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GILD is 25.9. 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 negative signal and 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 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately GILD wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); GILD investors were disappointed as the stock returned -2.7% since the end of June (through 11/5) 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 most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
