We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Editas Medicine, Inc. (NASDAQ:EDIT).
Editas Medicine, Inc. (NASDAQ:EDIT) has experienced a decrease in hedge fund interest recently. EDIT was in 11 hedge funds’ portfolios at the end of September. There were 14 hedge funds in our database with EDIT positions at the end of the previous quarter. Our calculations also showed that EDIT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are a large number of methods stock market investors can use to analyze publicly traded companies. Two of the most useful methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best money managers can outpace the broader indices by a significant amount (see the details here).
James E. Flynn of Deerfield Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the latest hedge fund action surrounding Editas Medicine, Inc. (NASDAQ:EDIT).
How have hedgies been trading Editas Medicine, Inc. (NASDAQ:EDIT)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the second quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in EDIT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Deerfield Management held the most valuable stake in Editas Medicine, Inc. (NASDAQ:EDIT), which was worth $26.4 million at the end of the third quarter. On the second spot was D E Shaw which amassed $22.2 million worth of shares. Viking Global, Casdin Capital, and Valiant Capital 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 Casdin Capital allocated the biggest weight to Editas Medicine, Inc. (NASDAQ:EDIT), around 1.19% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, earmarking 1.07 percent of its 13F equity portfolio to EDIT.
Since Editas Medicine, Inc. (NASDAQ:EDIT) has experienced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedge funds that slashed their positions entirely by the end of the third quarter. At the top of the heap, Leonard A. Potter’s Wildcat Capital Management sold off the biggest position of the 750 funds followed by Insider Monkey, valued at an estimated $4.6 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $2.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Editas Medicine, Inc. (NASDAQ:EDIT). These stocks are Hudson Ltd. (NYSE:HUD), SRC Energy Inc. (NYSE:SRCI), KKR Real Estate Finance Trust Inc. (NYSE:KREF), and NextPoint Residential Trust Inc (NYSE:NXRT). This group of stocks’ market values resemble EDIT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HUD | 12 | 31637 | 0 |
| SRCI | 20 | 245795 | 1 |
| KREF | 8 | 52402 | -1 |
| NXRT | 10 | 203374 | 0 |
| Average | 12.5 | 133302 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $101 million in EDIT’s case. SRC Energy Inc. (NYSE:SRCI) is the most popular stock in this table. On the other hand KKR Real Estate Finance Trust Inc. (NYSE:KREF) is the least popular one with only 8 bullish hedge fund positions. Editas Medicine, Inc. (NASDAQ:EDIT) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on EDIT as the stock returned 33.2% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
