We can judge whether Grifols SA (NASDAQ:GRFS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Grifols SA (NASDAQ:GRFS) has experienced an increase in activity from the world's largest hedge funds of late. GRFS was in 16 hedge funds' portfolios at the end of the second quarter of 2019. There were 14 hedge funds in our database with GRFS positions at the end of the previous quarter. Our calculations also showed that GRFS 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.
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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. Let's review the recent hedge fund action surrounding Grifols SA (NASDAQ:GRFS).
Hedge fund activity in Grifols SA (NASDAQ:GRFS)
At Q2's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in GRFS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Grifols SA (NASDAQ:GRFS) was held by Farallon Capital, which reported holding $65 million worth of stock at the end of March. It was followed by Soros Fund Management with a $44.9 million position. Other investors bullish on the company included Whitebox Advisors, GLG Partners, and Polar Capital.
Now, key money managers have jumped into Grifols SA (NASDAQ:GRFS) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most outsized position in Grifols SA (NASDAQ:GRFS). Balyasny Asset Management had $2.4 million invested in the company at the end of the quarter. Krishen Sud's Sivik Global Healthcare also made a $2.1 million investment in the stock during the quarter. The only other fund with a brand new GRFS position is Michael Gelband's ExodusPoint Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Grifols SA (NASDAQ:GRFS) but similarly valued. These stocks are DISH Network Corp. (NASDAQ:DISH), Fastenal Company (NASDAQ:FAST), Incyte Corporation (NASDAQ:INCY), and HEICO Corporation (NYSE:HEI). This group of stocks' market values are similar to GRFS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DISH,32,1599504,5 FAST,29,1154953,8 INCY,36,3728826,-3 HEI,35,1099994,9 Average,33,1895819,4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1896 million. That figure was $266 million in GRFS's case. Incyte Corporation (NASDAQ:INCY) is the most popular stock in this table. On the other hand Fastenal Company (NASDAQ:FAST) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Grifols SA (NASDAQ:GRFS) is even less popular than FAST. Hedge funds dodged a bullet by taking a bearish stance towards GRFS. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GRFS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GRFS investors were disappointed as the stock returned -5% 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.