Were Hedge Funds Right About Piling Into Hologic, Inc. (HOLX)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Hologic, Inc. (NASDAQ:HOLX).

Is Hologic, Inc. (NASDAQ:HOLX) a buy, sell, or hold? Hedge funds were in an optimistic mood. The number of bullish hedge fund bets rose by 5 recently. Hologic, Inc. (NASDAQ:HOLX) was in 46 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HOLX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 41 hedge funds in our database with HOLX positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are viewed as underperforming, old investment tools of yesteryear. While there are greater than 8000 funds trading at present, We look at the aristocrats of this club, around 850 funds. These money managers manage the lion’s share of the smart money’s total capital, and by keeping an eye on their first-class picks, Insider Monkey has revealed a number of investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Aaron Cowen of Suvretta Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let’s take a look at the recent hedge fund action regarding Hologic, Inc. (NASDAQ:HOLX).

How have hedgies been trading Hologic, Inc. (NASDAQ:HOLX)?

At Q2’s end, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HOLX over the last 20 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Hologic, Inc. (NASDAQ:HOLX) was held by Citadel Investment Group, which reported holding $292.2 million worth of stock at the end of September. It was followed by D E Shaw with a $129.3 million position. Other investors bullish on the company included Glenview Capital, Two Sigma Advisors, and AQR Capital Management. In terms of the portfolio weights assigned to each position Iron Triangle Partners allocated the biggest weight to Hologic, Inc. (NASDAQ:HOLX), around 7.18% of its 13F portfolio. Tamarack Capital Management is also relatively very bullish on the stock, setting aside 5.16 percent of its 13F equity portfolio to HOLX.

With a general bullishness amongst the heavyweights, key money managers have jumped into Hologic, Inc. (NASDAQ:HOLX) headfirst. Deerfield Management, managed by James E. Flynn, assembled the most valuable position in Hologic, Inc. (NASDAQ:HOLX). Deerfield Management had $78.1 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also initiated a $59.4 million position during the quarter. The other funds with brand new HOLX positions are Aaron Cowen’s Suvretta Capital Management, Christopher James’s Partner Fund Management, and Kevin Molloy’s Iron Triangle Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Hologic, Inc. (NASDAQ:HOLX) but similarly valued. We will take a look at BeiGene, Ltd. (NASDAQ:BGNE), CarMax Inc (NYSE:KMX), Broadridge Financial Solutions, Inc. (NYSE:BR), SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), Ryanair Holdings plc (NASDAQ:RYAAY), Domino’s Pizza, Inc. (NYSE:DPZ), and ViacomCBS Inc. (NASDAQ:VIAC). This group of stocks’ market valuations match HOLX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.3 hedge funds with bullish positions and the average amount invested in these stocks was $1556 million. That figure was $1547 million in HOLX’s case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 13 bullish hedge fund positions. Hologic, Inc. (NASDAQ:HOLX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HOLX is 71.7. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Hedge funds were also right about betting on HOLX as the stock returned 19.1% since the end of Q2 (through 10/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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