Gilead Sciences, Inc. (GILD) Fell Out Of Favor With Hedge Funds

·6 min read

In this article we will check out the progression of hedge fund sentiment towards Gilead Sciences, Inc. (NASDAQ:GILD) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Gilead Sciences, Inc. (NASDAQ:GILD) was in 65 hedge funds' portfolios at the end of March. The all time high for this statistic is 93. GILD shareholders have witnessed a decrease in support from the world's most elite money managers of late. There were 72 hedge funds in our database with GILD holdings at the end of December. Our calculations also showed that GILD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

According to most stock holders, hedge funds are seen as underperforming, outdated investment tools of yesteryear. While there are more than 8000 funds with their doors open today, We choose to focus on the bigwigs of this group, approximately 850 funds. These hedge fund managers preside over most of all hedge funds' total capital, and by monitoring their highest performing investments, Insider Monkey has figured out various investment strategies that have historically defeated the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Alex Denner Sarissa Capital
Alex Denner Sarissa Capital

Alex Denner of Sarissa Capital Management

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. With all of this in mind we're going to take a glance at the new hedge fund action surrounding Gilead Sciences, Inc. (NASDAQ:GILD).

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

At Q1's end, a total of 65 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the fourth quarter of 2020. By comparison, 76 hedge funds held shares or bullish call options in GILD a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Gilead Sciences, Inc. (NASDAQ:GILD) was held by Renaissance Technologies, which reported holding $424 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $396.2 million position. Other investors bullish on the company included Ariel Investments, Sarissa Capital Management, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Gilead Sciences, Inc. (NASDAQ:GILD), around 16.71% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, designating 10.8 percent of its 13F equity portfolio to GILD.

Judging by the fact that Gilead Sciences, Inc. (NASDAQ:GILD) has experienced declining sentiment from the smart money, it's safe to say that there were a few funds that decided to sell off their positions entirely by the end of the first quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital said goodbye to the largest position of the 750 funds tracked by Insider Monkey, worth an estimated $179.6 million in stock, and Jeremy Green's Redmile Group was right behind this move, as the fund dropped about $133.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds by the end of the first quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Gilead Sciences, Inc. (NASDAQ:GILD) but similarly valued. These stocks are Automatic Data Processing, Inc. (NASDAQ:ADP), Fiserv, Inc. (NASDAQ:FISV), Infosys Limited (NYSE:INFY), The TJX Companies, Inc. (NYSE:TJX), Snap Inc. (NYSE:SNAP), Prologis Inc (NYSE:PLD), and Truist Financial Corporation (NYSE:TFC). This group of stocks' market caps are closest to GILD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ADP,42,2924374,-6 FISV,75,2748118,-19 INFY,26,2011419,3 TJX,63,2348057,-5 SNAP,73,4324308,10 PLD,39,771817,3 TFC,36,845826,-4 Average,50.6,2281988,-2.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.6 hedge funds with bullish positions and the average amount invested in these stocks was $2282 million. That figure was $2690 million in GILD's case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Infosys Limited (NYSE:INFY) is the least popular one with only 26 bullish hedge fund positions. Gilead Sciences, Inc. (NASDAQ:GILD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GILD is 58.8. 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately GILD wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GILD were disappointed as the stock returned 6.4% since the end of March (through 6/11) 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.

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