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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 Global Blood Therapeutics Inc (NASDAQ:GBT) 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 Global Blood Therapeutics Inc (NASDAQ:GBT) a buy right now? The smart money is becoming less hopeful. The number of bullish hedge fund bets went down by 3 recently. Our calculations also showed that GBT 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). GBT was in 23 hedge funds' portfolios at the end of December. There were 26 hedge funds in our database with GBT positions at the end of the previous quarter.
According to most stock holders, hedge funds are perceived as unimportant, old investment vehicles of yesteryear. While there are greater than 8000 funds in operation at present, Our researchers choose to focus on the crème de la crème of this group, approximately 850 funds. These investment experts preside over the majority of all hedge funds' total capital, and by tailing their matchless stock picks, Insider Monkey has formulated several investment strategies that have historically outperformed the market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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John Overdeck of Two Sigma Advisors[/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. Keeping this in mind let's review the fresh hedge fund action regarding Global Blood Therapeutics Inc (NASDAQ:GBT).
What does smart money think about Global Blood Therapeutics Inc (NASDAQ:GBT)?
At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in GBT a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Perceptive Advisors was the largest shareholder of Global Blood Therapeutics Inc (NASDAQ:GBT), with a stake worth $466.3 million reported as of the end of September. Trailing Perceptive Advisors was Farallon Capital, which amassed a stake valued at $59.6 million. Camber Capital Management, Citadel Investment Group, and Point72 Asset 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 Perceptive Advisors allocated the biggest weight to Global Blood Therapeutics Inc (NASDAQ:GBT), around 9.26% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, dishing out 2.95 percent of its 13F equity portfolio to GBT.
Since Global Blood Therapeutics Inc (NASDAQ:GBT) has witnessed a decline in interest from the smart money, we can see that there was a specific group of funds who sold off their positions entirely by the end of the third quarter. It's worth mentioning that Behzad Aghazadeh's venBio Select Advisor cut the largest investment of the "upper crust" of funds watched by Insider Monkey, totaling about $48.5 million in stock, and Kevin Kotler's Broadfin Capital was right behind this move, as the fund said goodbye to about $8.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Global Blood Therapeutics Inc (NASDAQ:GBT) but similarly valued. We will take a look at Clean Harbors Inc (NYSE:CLH), First Financial Bankshares Inc (NASDAQ:FFIN), Companhia Siderurgica Nacional (NYSE:SID), and Cirrus Logic, Inc. (NASDAQ:CRUS). This group of stocks' market caps are closest to GBT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLH,24,474390,-4 FFIN,13,9578,-3 SID,6,18104,-1 CRUS,25,486049,-1 Average,17,247030,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $793 million in GBT's case. Cirrus Logic, Inc. (NASDAQ:CRUS) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 6 bullish hedge fund positions. Global Blood Therapeutics Inc (NASDAQ:GBT) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately GBT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GBT were disappointed as the stock returned -34.6% 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 many of these stocks already outperformed the market so far this year.
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.