Were Hedge Funds Right About Guardant Health, Inc. (GH)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Guardant Health, Inc. (NASDAQ:GH).

Guardant Health, Inc. (NASDAQ:GH) investors should be aware of an increase in enthusiasm from smart money recently. Guardant Health, Inc. (NASDAQ:GH) was in 49 hedge funds’ portfolios at the end of June. 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 Q2 rankings).

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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Glen Kacher of Light Street Capital

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 check out the new hedge fund action regarding Guardant Health, Inc. (NASDAQ:GH).

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

Heading into the third quarter of 2021, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the first quarter of 2020. On the other hand, there were a total of 36 hedge funds with a bullish position in GH a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Viking Global was the largest shareholder of Guardant Health, Inc. (NASDAQ:GH), with a stake worth $528.6 million reported as of the end of June. Trailing Viking Global was Coatue Management, which amassed a stake valued at $330.5 million. OrbiMed Advisors, Polar Capital, and Light Street Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Iron Triangle Partners allocated the biggest weight to Guardant Health, Inc. (NASDAQ:GH), around 4.48% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, designating 2.76 percent of its 13F equity portfolio to GH.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Light Street Capital, managed by Glen Kacher, assembled the most valuable position in Guardant Health, Inc. (NASDAQ:GH). Light Street Capital had $63.6 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $33.6 million position during the quarter. The following funds were also among the new GH investors: Phill Gross and Robert Atchinson’s Adage Capital Management, Steve Cohen’s Point72 Asset Management, and Frank Fu’s CaaS Capital.

Let’s check out hedge fund activity in other stocks similar to Guardant Health, Inc. (NASDAQ:GH). These stocks are The Boston Beer Company Inc (NYSE:SAM), American Homes 4 Rent (NYSE:AMH), Allegion plc (NYSE:ALLE), Universal Health Services, Inc. (NYSE:UHS), Sociedad Química y Minera de Chile S.A. (NYSE:SQM), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), and Annaly Capital Management, Inc. (NYSE:NLY). This group of stocks’ market caps are closest to GH’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $596 million. That figure was $1709 million in GH’s case. The Boston Beer Company Inc (NYSE:SAM) is the most popular stock in this table. On the other hand Sociedad Química y Minera de Chile S.A. (NYSE:SQM) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Guardant Health, Inc. (NASDAQ:GH) is more popular among hedge funds. Our overall hedge fund sentiment score for GH is 88.3. 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. 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 still beat the market by 3.1 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 -11.3% since the end of the second quarter (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 since 2019.

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