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Hedge Funds Are Selling GW Pharmaceuticals plc (GWPH)

Nina Todic

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is GW Pharmaceuticals plc (NASDAQ:GWPH), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

GW Pharmaceuticals plc (NASDAQ:GWPH) has experienced a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that GWPH isn't among the 30 most popular stocks among hedge funds.

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.

Felix Baker - Baker Bros.

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 view the latest hedge fund action surrounding GW Pharmaceuticals plc (NASDAQ:GWPH).

What have hedge funds been doing with GW Pharmaceuticals plc (NASDAQ:GWPH)?

At Q2's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in GWPH a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

No of Hedge Funds with GWPH Positions

More specifically, Point72 Asset Management was the largest shareholder of GW Pharmaceuticals plc (NASDAQ:GWPH), with a stake worth $115.6 million reported as of the end of March. Trailing Point72 Asset Management was Rock Springs Capital Management, which amassed a stake valued at $104.3 million. Citadel Investment Group, Baker Bros. Advisors, and Polar Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Because GW Pharmaceuticals plc (NASDAQ:GWPH) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of money managers who were dropping their positions entirely by the end of the second quarter. It's worth mentioning that Matt Sirovich and Jeremy Mindich's Scopia Capital dumped the largest position of the 750 funds tracked by Insider Monkey, totaling about $126.4 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dumped about $21.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 7 funds by the end of the second quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as GW Pharmaceuticals plc (NASDAQ:GWPH) but similarly valued. These stocks are Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Ashland Global Holdings Inc. (NYSE:ASH), ViaSat, Inc. (NASDAQ:VSAT), and TFS Financial Corporation (NASDAQ:TFSL). This group of stocks' market valuations match GWPH's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBGI,36,584117,8 ASH,31,1316973,1 VSAT,28,2028094,6 TFSL,5,153154,-2 Average,25,1020585,3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1021 million. That figure was $442 million in GWPH's case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 5 bullish hedge fund positions. GW Pharmaceuticals plc (NASDAQ:GWPH) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GWPH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GWPH investors were disappointed as the stock returned -33.3% 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 (view the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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