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We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's take a look at whether Myriad Genetics, Inc. (NASDAQ:MYGN) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Myriad Genetics, Inc. (NASDAQ:MYGN) has seen an increase in activity from the world's largest hedge funds lately. MYGN was in 15 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 13 hedge funds in our database with MYGN holdings at the end of the previous quarter. Our calculations also showed that MYGN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 more than 41 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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Sander Gerber of Hudson Bay Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's take a gander at the new hedge fund action regarding Myriad Genetics, Inc. (NASDAQ:MYGN).
How have hedgies been trading Myriad Genetics, Inc. (NASDAQ:MYGN)?
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in MYGN over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Glenview Capital was the largest shareholder of Myriad Genetics, Inc. (NASDAQ:MYGN), with a stake worth $93.8 million reported as of the end of September. Trailing Glenview Capital was D E Shaw, which amassed a stake valued at $78.1 million. Camber Capital 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 Camber Capital Management allocated the biggest weight to Myriad Genetics, Inc. (NASDAQ:MYGN), around 1.39% of its 13F portfolio. Glenview Capital is also relatively very bullish on the stock, setting aside 0.82 percent of its 13F equity portfolio to MYGN.
As one would reasonably expect, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the biggest position in Myriad Genetics, Inc. (NASDAQ:MYGN). Millennium Management had $20.1 million invested in the company at the end of the quarter. Renaissance Technologies also made a $2.6 million investment in the stock during the quarter. The following funds were also among the new MYGN investors: Andrew Kurita's Kettle Hill Capital Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Donald Sussman's Paloma Partners.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Myriad Genetics, Inc. (NASDAQ:MYGN) but similarly valued. These stocks are Ambarella Inc (NASDAQ:AMBA), Renasant Corporation (NASDAQ:RNST), Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE), and SJW Corp. (NYSE:SJW). This group of stocks' market caps are similar to MYGN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMBA,26,206071,-4 RNST,12,70374,3 COKE,11,27470,-3 SJW,11,145886,-11 Average,15,112450,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $237 million in MYGN's case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE) is the least popular one with only 11 bullish hedge fund positions. Myriad Genetics, Inc. (NASDAQ:MYGN) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately MYGN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MYGN investors were disappointed as the stock returned -43.7% during the same time period 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 in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.