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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Genmab A/S (NASDAQ:GMAB).
Is GMAB a good stock to buy now? Investors who are in the know were getting more optimistic. The number of long hedge fund bets rose by 3 recently. Genmab A/S (NASDAQ:GMAB) was in 18 hedge funds' portfolios at the end of September. The all time high for this statistic is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GMAB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 15 hedge funds in our database with GMAB positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Andreas Halvorsen of Viking Global
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind we're going to take a look at the fresh hedge fund action regarding Genmab A/S (NASDAQ:GMAB).
Do Hedge Funds Think GMAB Is A Good Stock To Buy Now?
At the end of September, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GMAB over the last 21 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the biggest position in Genmab A/S (NASDAQ:GMAB). Renaissance Technologies has a $60.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Hillhouse Capital Management, led by Lei Zhang, holding a $54.9 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers that are bullish include Phill Gross and Robert Atchinson's Adage Capital Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Andreas Halvorsen's Viking Global. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to Genmab A/S (NASDAQ:GMAB), around 0.88% of its 13F portfolio. Hillhouse Capital Management is also relatively very bullish on the stock, dishing out 0.42 percent of its 13F equity portfolio to GMAB.
As aggregate interest increased, key money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the most valuable position in Genmab A/S (NASDAQ:GMAB). Adage Capital Management had $18.3 million invested in the company at the end of the quarter. Marc Schneidman's Aquilo Capital Management also initiated a $1.8 million position during the quarter. The following funds were also among the new GMAB investors: Bhagwan Jay Rao's Integral Health Asset Management, Dmitry Balyasny's Balyasny Asset Management, and John Zaro's Bourgeon Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Genmab A/S (NASDAQ:GMAB) but similarly valued. We will take a look at Hilton Worldwide Holdings Inc (NYSE:HLT), Palo Alto Networks Inc (NYSE:PANW), Roku, Inc. (NASDAQ:ROKU), LyondellBasell Industries NV (NYSE:LYB), Verisign, Inc. (NASDAQ:VRSN), ZTO Express (Cayman) Inc. (NYSE:ZTO), and Sirius XM Holdings Inc (NASDAQ:SIRI). All of these stocks' market caps are closest to GMAB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HLT,57,5109622,4 PANW,59,3197324,8 ROKU,59,1030571,18 LYB,31,604061,-1 VRSN,46,6088181,-1 ZTO,22,499840,4 SIRI,37,748381,-5 Average,44.4,2468283,3.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.4 hedge funds with bullish positions and the average amount invested in these stocks was $2468 million. That figure was $203 million in GMAB's case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Genmab A/S (NASDAQ:GMAB) is even less popular than ZTO. Our overall hedge fund sentiment score for GMAB is 38. 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. Hedge funds dodged a bullet by taking a bearish stance towards GMAB. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th but managed to beat the market again by 15.8 percentage points. Unfortunately GMAB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GMAB investors were disappointed as the stock returned 6.8% since the end of the third quarter (through 12/14) 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 most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.