We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Galectin Therapeutics Inc. (NASDAQ:GALT).
Galectin Therapeutics Inc. (NASDAQ:GALT) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 7. GALT investors should pay attention to a decrease in hedge fund sentiment recently. There were 4 hedge funds in our database with GALT holdings at the end of December. Our calculations also showed that GALT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 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.
Rudolph Kluiber of GRT Capital Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Now we're going to go over the key hedge fund action surrounding Galectin Therapeutics Inc. (NASDAQ:GALT).
Do Hedge Funds Think GALT Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in GALT over the last 23 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Galectin Therapeutics Inc. (NASDAQ:GALT), with a stake worth $0.7 million reported as of the end of March. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $0.1 million. Citadel Investment Group was 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 GRT Capital Partners allocated the biggest weight to Galectin Therapeutics Inc. (NASDAQ:GALT), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0008 percent of its 13F equity portfolio to GALT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified GALT as a viable investment and initiated a position in the stock.
Let's now review hedge fund activity in other stocks similar to Galectin Therapeutics Inc. (NASDAQ:GALT). These stocks are Q&K International Group Limited (NASDAQ:QK), Biolase Inc (NASDAQ:BIOL), iMedia Brands, Inc. (NASDAQ:IMBI), Old Point Financial Corporation (NASDAQ:OPOF), First United Corp (NASDAQ:FUNC), Otonomy Inc (NASDAQ:OTIC), and Scopus BioPharma Inc. (NASDAQ:SCPS). All of these stocks' market caps resemble GALT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QK,1,34,0 BIOL,3,2375,0 IMBI,5,11520,3 OPOF,2,1411,0 FUNC,2,4659,-3 OTIC,16,44505,-4 SCPS,2,943,1 Average,4.4,9350,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $1 million in GALT's case. Otonomy Inc (NASDAQ:OTIC) is the most popular stock in this table. On the other hand Q&K International Group Limited (NASDAQ:QK) is the least popular one with only 1 bullish hedge fund positions. Galectin Therapeutics Inc. (NASDAQ:GALT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GALT is 23.5. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on GALT as the stock returned 72.8% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.