World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Hedge fund interest in Glaukos Corporation (NYSE:GKOS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare GKOS to other stocks including Lithia Motors Inc (NYSE:LAD), Vonage Holdings Corp. (NYSE:VG), and TC Pipelines, LP (NYSE:TCP) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the key hedge fund action surrounding Glaukos Corporation (NYSE:GKOS).
What have hedge funds been doing with Glaukos Corporation (NYSE:GKOS)?
Heading into the third quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in GKOS 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.
The largest stake in Glaukos Corporation (NYSE:GKOS) was held by Renaissance Technologies, which reported holding $13.2 million worth of stock at the end of March. It was followed by Point72 Asset Management with a $11.3 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and GLG Partners.
Because Glaukos Corporation (NYSE:GKOS) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there exists a select few fund managers that elected to cut their full holdings heading into Q3. Intriguingly, James E. Flynn's Deerfield Management dropped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, comprising an estimated $17.9 million in stock, and Brian Ashford-Russell and Tim Woolley's Polar Capital was right behind this move, as the fund dumped about $10.6 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Glaukos Corporation (NYSE:GKOS). We will take a look at Lithia Motors Inc (NYSE:LAD), Vonage Holdings Corp. (NYSE:VG), TC Pipelines, LP (NYSE:TCP), and Cimpress NV (NASDAQ:CMPR). All of these stocks' market caps resemble GKOS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LAD,21,550945,4 VG,39,361173,5 TCP,5,18940,0 CMPR,12,495773,1 Average,19.25,356708,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $357 million. That figure was $65 million in GKOS's case. Vonage Holdings Corp. (NYSE:VG) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 5 bullish hedge fund positions. Glaukos Corporation (NYSE:GKOS) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GKOS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GKOS investors were disappointed as the stock returned -17.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.