The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Galapagos NV (NASDAQ:GLPG) from the perspective of those elite funds.
Is Galapagos NV (NASDAQ:GLPG) going to take off soon? Money managers are selling. The number of bullish hedge fund positions were cut by 1 lately. Our calculations also showed that GLPG isn't among the 30 most popular stocks among hedge funds. GLPG was in 15 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 16 hedge funds in our database with GLPG holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to go over the new hedge fund action surrounding Galapagos NV (NASDAQ:GLPG).
What have hedge funds been doing with Galapagos NV (NASDAQ:GLPG)?
Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in GLPG over the last 14 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Galapagos NV (NASDAQ:GLPG) was held by Deerfield Management, which reported holding $26.5 million worth of stock at the end of September. It was followed by Rock Springs Capital Management with a $16.3 million position. Other investors bullish on the company included Marshall Wace LLP, Millennium Management, and Prosight Capital.
Because Galapagos NV (NASDAQ:GLPG) has witnessed declining sentiment from the smart money, logic holds that there was a specific group of funds who sold off their full holdings heading into Q3. At the top of the heap, Samuel Isaly's OrbiMed Advisors sold off the biggest stake of all the hedgies tracked by Insider Monkey, totaling about $44 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund sold off about $2.8 million worth. These transactions are interesting, as total hedge fund interest was cut by 1 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to Galapagos NV (NASDAQ:GLPG). These stocks are Alcoa Corporation (NYSE:AA), Aurora Cannabis Inc. (NYSE:ACB), Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), and Mellanox Technologies, Ltd. (NASDAQ:MLNX). All of these stocks' market caps resemble GLPG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AA,30,402782,-8 ACB,9,42637,9 TKC,9,15197,1 MLNX,45,1295298,13 Average,23.25,438979,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $439 million. That figure was $93 million in GLPG's case. Mellanox Technologies, Ltd. (NASDAQ:MLNX) is the most popular stock in this table. On the other hand Aurora Cannabis Inc. (NYSE:ACB) is the least popular one with only 9 bullish hedge fund positions. Galapagos NV (NASDAQ:GLPG) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on GLPG as the stock returned 24.6% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.