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In this article we are going to use hedge fund sentiment as a tool and determine whether Globus Medical Inc (NYSE:GMED) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Globus Medical Inc (NYSE:GMED) shareholders have witnessed a decrease in activity from the world's largest hedge funds recently. Globus Medical Inc (NYSE:GMED) was in 28 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 34. There were 34 hedge funds in our database with GMED positions at the end of the fourth quarter. Our calculations also showed that GMED 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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Cliff Asness of AQR Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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. With all of this in mind we're going to check out the latest hedge fund action regarding Globus Medical Inc (NYSE:GMED).
Do Hedge Funds Think GMED Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in GMED a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Polar Capital held the most valuable stake in Globus Medical Inc (NYSE:GMED), which was worth $43.2 million at the end of the fourth quarter. On the second spot was Consonance Capital Management which amassed $35.7 million worth of shares. Balyasny Asset Management, Millennium Management, and AQR Capital Management 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 Consonance Capital Management allocated the biggest weight to Globus Medical Inc (NYSE:GMED), around 3.8% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, dishing out 1.46 percent of its 13F equity portfolio to GMED.
Due to the fact that Globus Medical Inc (NYSE:GMED) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of fund managers who sold off their positions entirely in the first quarter. It's worth mentioning that Matthew Hulsizer's PEAK6 Capital Management dumped the biggest position of all the hedgies followed by Insider Monkey, comprising about $2.3 million in stock. Qing Li's fund, Sciencast Management, also dumped its stock, about $1.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 6 funds in the first quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Globus Medical Inc (NYSE:GMED) but similarly valued. We will take a look at Harley-Davidson, Inc. (NYSE:HOG), Emcor Group Inc (NYSE:EME), MP Materials Corp. (NYSE:MP), Lattice Semiconductor Corporation (NASDAQ:LSCC), Coursera, Inc. (NYSE:COUR), Cimarex Energy Co (NYSE:XEC), and Allakos Inc. (NASDAQ:ALLK). This group of stocks' market values are closest to GMED's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HOG,28,822936,-7 EME,20,166658,-5 MP,29,2624120,-3 LSCC,24,276967,1 COUR,25,119794,25 XEC,39,775009,5 ALLK,13,456292,2 Average,25.4,748825,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.4 hedge funds with bullish positions and the average amount invested in these stocks was $749 million. That figure was $194 million in GMED's case. Cimarex Energy Co (NYSE:XEC) is the most popular stock in this table. On the other hand Allakos Inc. (NASDAQ:ALLK) is the least popular one with only 13 bullish hedge fund positions. Globus Medical Inc (NYSE:GMED) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GMED is 52.6. 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 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on GMED as the stock returned 30.7% since the end of Q1 (through 7/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.