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Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Globant SA (NYSE:GLOB).
Is Globant SA (NYSE:GLOB) the right pick for your portfolio? The smart money is in an optimistic mood. The number of long hedge fund bets inched up by 1 recently. Our calculations also showed that GLOB 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). GLOB was in 18 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 17 hedge funds in our database with GLOB holdings at the end of the previous quarter.
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' 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 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. With all of this in mind let's take a glance at the recent hedge fund action surrounding Globant SA (NYSE:GLOB).
Hedge fund activity in Globant SA (NYSE:GLOB)
Heading into the first quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GLOB over the last 18 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Globant SA (NYSE:GLOB) was held by Driehaus Capital, which reported holding $27.1 million worth of stock at the end of September. It was followed by GLG Partners with a $5.3 million position. Other investors bullish on the company included Sloane Robinson Investment Management, McKinley Capital Management, and Gotham Asset Management. In terms of the portfolio weights assigned to each position Sloane Robinson Investment Management allocated the biggest weight to Globant SA (NYSE:GLOB), around 1.12% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, dishing out 0.72 percent of its 13F equity portfolio to GLOB.
As industrywide interest jumped, some big names were breaking ground themselves. Sciencast Management, managed by Qing Li, established the most valuable position in Globant SA (NYSE:GLOB). Sciencast Management had $0.3 million invested in the company at the end of the quarter. Donald Sussman's Paloma Partners also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new GLOB position is Bernard Horn's Polaris Capital Management.
Let's also examine hedge fund activity in other stocks similar to Globant SA (NYSE:GLOB). These stocks are Selective Insurance Group, Inc. (NASDAQ:SIGI), United Therapeutics Corporation (NASDAQ:UTHR), ICU Medical, Inc. (NASDAQ:ICUI), and Wright Medical Group N.V. (NASDAQ:WMGI). This group of stocks' market valuations match GLOB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SIGI,25,111114,-1 UTHR,36,1137929,3 ICUI,17,402123,1 WMGI,46,1070415,7 Average,31,680395,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $680 million. That figure was $53 million in GLOB's case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand ICU Medical, Inc. (NASDAQ:ICUI) is the least popular one with only 17 bullish hedge fund positions. Globant SA (NYSE:GLOB) is not the least popular stock in this group but hedge fund interest is still below average. 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 still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on GLOB as the stock returned -16.5% during the same time period and outperformed the market by an even larger margin.
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.