What This Metric Says About Hologic, Inc. (HOLX)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Hologic, Inc. (NASDAQ:HOLX)? The smart money sentiment can provide an answer to this question.

It looks like money managers are becoming less confident about Hologic, as the number of investors holding shares of the company declined by two during the third quarter. In this way, 33 funds from our database reported long positions in Hologic as of the end of September. At the end of this article we will also compare HOLX to other stocks including Philippine Long Distance Telephone (ADR) (NYSE:PHI), Xerox Corporation (NYSE:XRX), and CarMax, Inc (NYSE:KMX) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

ATeam/Shutterstock.com

Keeping this in mind, let’s take a peek at the recent action surrounding Hologic, Inc. (NASDAQ:HOLX).

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

Heading into the fourth quarter of 2016, 33 of the hedge funds tracked by Insider Monkey were long Hologic, which represents a decline of 6% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in Hologic, Inc. (NASDAQ:HOLX), worth close to $109.2 million, amounting to 0.1% of its total 13F portfolio. The second largest stake is held by Arthur B Cohen and Joseph Heale’s Healthcor Management LP, which disclosed a $73.8 million position; 4.5% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish include Cliff Asness’ AQR Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Judging by the fact that Hologic, Inc. (NASDAQ:HOLX) has witnessed a decline in interest from the smart money, it’s easy to see that there were a few funds that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Christopher James’ Partner Fund Management dumped the biggest investment of the 700 funds followed by Insider Monkey, totaling close to $40.7 million in call options, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $6.9 million worth of shares.

Let’s now review hedge fund activity in other stocks similar to Hologic, Inc. (NASDAQ:HOLX). We will take a look at Philippine Long Distance Telephone (ADR) (NYSE:PHI), Xerox Corporation (NYSE:XRX), CarMax, Inc (NYSE:KMX), and Huaneng Power International Inc (ADR) (NYSE:HNP). This group of stocks’ market caps resemble HOLX’s market cap.

As you can see these stocks had an average of 18 funds with bullish positions at the end of September and the average amount invested in these stocks was $643 million, which compares with $813 million in HOLX’s case. CarMax, Inc (NYSE:KMX) is the most popular stock in this table, while Huaneng Power International Inc (ADR) (NYSE:HNP) is the least popular one with only one fund holding shares. Hologic, Inc. (NASDAQ:HOLX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CarMax, Inc (NYSE:KMX) might be a better candidate to consider a long position.