Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Halozyme Therapeutics, Inc. (NASDAQ:HALO).
Halozyme Therapeutics, Inc. (NASDAQ:HALO) has experienced an increase in hedge fund interest in recent months. Our calculations also showed that HALO isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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 analyze the key hedge fund action regarding Halozyme Therapeutics, Inc. (NASDAQ:HALO).
Hedge fund activity in Halozyme Therapeutics, Inc. (NASDAQ:HALO)
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in HALO over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Halozyme Therapeutics, Inc. (NASDAQ:HALO) was held by Iridian Asset Management, which reported holding $83.3 million worth of stock at the end of March. It was followed by Point72 Asset Management with a $20.4 million position. Other investors bullish on the company included Fisher Asset Management, Citadel Investment Group, and GLG Partners.
As one would reasonably expect, specific money managers have been driving this bullishness. Iridian Asset Management, managed by David Cohen and Harold Levy, created the biggest position in Halozyme Therapeutics, Inc. (NASDAQ:HALO). Iridian Asset Management had $83.3 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $20.4 million position during the quarter. The other funds with new positions in the stock are Sander Gerber's Hudson Bay Capital Management, Bill Miller's Miller Value Partners, and Minhua Zhang's Weld Capital Management.
Let's now review hedge fund activity in other stocks similar to Halozyme Therapeutics, Inc. (NASDAQ:HALO). These stocks are Retail Properties of America Inc (NYSE:RPAI), Red Rock Resorts, Inc. (NASDAQ:RRR), Argo Group International Holdings, Ltd. (NYSE:ARGO), and QTS Realty Trust Inc (NYSE:QTS). This group of stocks' market caps are similar to HALO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RPAI,14,241189,-2 RRR,16,317709,-1 ARGO,19,218517,2 QTS,23,357128,1 Average,18,283636,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $204 million in HALO's case. QTS Realty Trust Inc (NYSE:QTS) is the most popular stock in this table. On the other hand Retail Properties of America Inc (NYSE:RPAI) is the least popular one with only 14 bullish hedge fund positions. Halozyme Therapeutics, Inc. (NASDAQ:HALO) 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. 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 HALO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HALO were disappointed as the stock returned -9.7% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.