In this article you are going to find out whether hedge funds think GW Pharmaceuticals plc (NASDAQ:GWPH) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is GW Pharmaceuticals plc (NASDAQ:GWPH) going to take off soon? Investors who are in the know are taking a bearish view. The number of long hedge fund positions fell by 3 in recent months. Our calculations also showed that GWPH isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). GWPH was in 21 hedge funds' portfolios at the end of March. There were 24 hedge funds in our database with GWPH holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_258236" align="aligncenter" width="400"] Ken Griffin of Citadel Investment Group[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a gander at the recent hedge fund action encompassing GW Pharmaceuticals plc (NASDAQ:GWPH).
What does smart money think about GW Pharmaceuticals plc (NASDAQ:GWPH)?
At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GWPH over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of GW Pharmaceuticals plc (NASDAQ:GWPH), with a stake worth $85.6 million reported as of the end of September. Trailing Citadel Investment Group was Great Point Partners, which amassed a stake valued at $39.4 million. Baker Bros. Advisors, Woodline Partners, and Holocene Advisors 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 Parkman Healthcare Partners allocated the biggest weight to GW Pharmaceuticals plc (NASDAQ:GWPH), around 4.98% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, dishing out 4.93 percent of its 13F equity portfolio to GWPH.
Judging by the fact that GW Pharmaceuticals plc (NASDAQ:GWPH) has experienced declining sentiment from the smart money, logic holds that there was a specific group of money managers that slashed their positions entirely last quarter. At the top of the heap, Mitchell Blutt's Consonance Capital Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, valued at about $63.2 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $26.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as GW Pharmaceuticals plc (NASDAQ:GWPH) but similarly valued. We will take a look at Schrodinger, Inc. (NASDAQ:SDGR), H&R Block, Inc. (NYSE:HRB), Murphy USA Inc. (NYSE:MUSA), and AMN Healthcare Services Inc (NYSE:AMN). This group of stocks' market values match GWPH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SDGR,15,542132,15 HRB,19,177631,-11 MUSA,24,198115,-4 AMN,22,78978,12 Average,20,249214,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $263 million in GWPH's case. Murphy USA Inc. (NYSE:MUSA) is the most popular stock in this table. On the other hand Schrodinger, Inc. (NASDAQ:SDGR) is the least popular one with only 15 bullish hedge fund positions. GW Pharmaceuticals plc (NASDAQ:GWPH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on GWPH as the stock returned 43.5% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.