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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Genetron Holdings Limited (NASDAQ:GTH).
Genetron Holdings Limited (NASDAQ:GTH) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. GTH has experienced a decrease in activity from the world's largest hedge funds of late. There were 16 hedge funds in our database with GTH positions at the end of the second quarter. Our calculations also showed that GTH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Howard Marks of Oaktree Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we're going to take a look at the key hedge fund action surrounding Genetron Holdings Limited (NASDAQ:GTH).
Do Hedge Funds Think GTH Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GTH over the last 21 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Vivo Capital held the most valuable stake in Genetron Holdings Limited (NASDAQ:GTH), which was worth $75.7 million at the end of the third quarter. On the second spot was Oaktree Capital Management which amassed $7.7 million worth of shares. Cormorant Asset Management, Platinum Asset Management, and Millennium Management 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 Vivo Capital allocated the biggest weight to Genetron Holdings Limited (NASDAQ:GTH), around 4.37% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, setting aside 0.23 percent of its 13F equity portfolio to GTH.
Because Genetron Holdings Limited (NASDAQ:GTH) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of fund managers who were dropping their full holdings last quarter. At the top of the heap, Efrem Kamen's Pura Vida Investments sold off the largest investment of the "upper crust" of funds followed by Insider Monkey, totaling an estimated $2.6 million in stock, and Stuart J. Zimmer's Zimmer Partners was right behind this move, as the fund cut about $0.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Genetron Holdings Limited (NASDAQ:GTH). We will take a look at NANO-X IMAGING LTD (NASDAQ:NNOX), Lindsay Corporation (NYSE:LNN), Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT), Ontrak, Inc. (NASDAQ:OTRK), Safety Insurance Group, Inc. (NASDAQ:SAFT), Cerus Corporation (NASDAQ:CERS), and Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA). This group of stocks' market valuations resemble GTH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NNOX,6,23654,6 LNN,16,161024,5 ARCT,20,171723,-1 OTRK,12,12778,1 SAFT,17,42473,4 CERS,12,112765,-2 KNSA,20,212720,2 Average,14.7,105305,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $100 million in GTH's case. Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) is the most popular stock in this table. On the other hand NANO-X IMAGING LTD (NASDAQ:NNOX) is the least popular one with only 6 bullish hedge fund positions. Genetron Holdings Limited (NASDAQ:GTH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GTH is 44.9. 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. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on GTH as the stock returned 14.5% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.