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Hedge Funds Are Piling Into Galapagos NV (GLPG)

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  • GLPG.AS

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 873 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th. In this article we look at what those investors think of Galapagos NV (NASDAQ:GLPG).

Galapagos NV (NASDAQ:GLPG) has experienced an increase in hedge fund sentiment in recent months. Galapagos NV (NASDAQ:GLPG) was in 23 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 20 hedge funds in our database with GLPG holdings at the end of March. Our calculations also showed that GLPG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

James Flynn Deerfield Management
James Flynn Deerfield Management

James E. Flynn of Deerfield Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's analyze the recent hedge fund action surrounding Galapagos NV (NASDAQ:GLPG).

Do Hedge Funds Think GLPG Is A Good Stock To Buy Now?

At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in GLPG 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.

Among these funds, Point72 Asset Management held the most valuable stake in Galapagos NV (NASDAQ:GLPG), which was worth $49.1 million at the end of the second quarter. On the second spot was Deerfield Management which amassed $45.3 million worth of shares. Citadel Investment Group, OrbiMed Advisors, and Ikarian Capital 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 Prosight Capital allocated the biggest weight to Galapagos NV (NASDAQ:GLPG), around 3.1% of its 13F portfolio. Aquilo Capital Management is also relatively very bullish on the stock, setting aside 2.55 percent of its 13F equity portfolio to GLPG.

As aggregate interest increased, key money managers have jumped into Galapagos NV (NASDAQ:GLPG) headfirst. Deerfield Management, managed by James E. Flynn, assembled the largest position in Galapagos NV (NASDAQ:GLPG). Deerfield Management had $45.3 million invested in the company at the end of the quarter. Christopher James's Partner Fund Management also made a $10.4 million investment in the stock during the quarter. The following funds were also among the new GLPG investors: Ken Greenberg and David Kim's Ghost Tree Capital, Ari Zweiman's 683 Capital Partners, and Frank Fu's CaaS Capital.

Let's go over hedge fund activity in other stocks similar to Galapagos NV (NASDAQ:GLPG). These stocks are Itron, Inc. (NASDAQ:ITRI), fuboTV Inc. (NYSE:FUBO), Xerox Holdings Corporation (NYSE:XRX), Shake Shack Inc (NYSE:SHAK), UMB Financial Corporation (NASDAQ:UMBF), Seaboard Corporation (NYSE:SEB), and Datto Holding Corp. (NYSE:MSP). This group of stocks' market caps are closest to GLPG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITRI,16,290609,-13 FUBO,18,203267,0 XRX,25,1116930,-5 SHAK,20,459784,-3 UMBF,14,129934,1 SEB,13,129209,-1 MSP,12,3351238,-2 Average,16.9,811567,-3.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $812 million. That figure was $245 million in GLPG's case. Xerox Holdings Corporation (NYSE:XRX) is the most popular stock in this table. On the other hand Datto Holding Corp. (NYSE:MSP) is the least popular one with only 12 bullish hedge fund positions. Galapagos NV (NASDAQ:GLPG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GLPG is 80.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately GLPG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GLPG were disappointed as the stock returned -26.1% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.