Did Hedge Funds Make The Right Call On Immunomedics, Inc. (IMMU) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Immunomedics, Inc. (NASDAQ:IMMU) and determine whether the smart money was really smart about this stock.

Immunomedics, Inc. (NASDAQ:IMMU) has seen a decrease in enthusiasm from smart money lately. Our calculations also showed that IMMU isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Philip Hempleman of Ardsley Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the recent hedge fund action surrounding Immunomedics, Inc. (NASDAQ:IMMU).

How have hedgies been trading Immunomedics, Inc. (NASDAQ:IMMU)?

At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards IMMU over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Immunomedics, Inc. (NASDAQ:IMMU) was held by Avoro Capital Advisors (venBio Select Advisor), which reported holding $330.3 million worth of stock at the end of September. It was followed by Palo Alto Investors with a $71.3 million position. Other investors bullish on the company included Deerfield Management, Point72 Asset Management, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Avoro Capital Advisors (venBio Select Advisor) allocated the biggest weight to Immunomedics, Inc. (NASDAQ:IMMU), around 11.15% of its 13F portfolio. Foresite Capital is also relatively very bullish on the stock, designating 8.59 percent of its 13F equity portfolio to IMMU.

Seeing as Immunomedics, Inc. (NASDAQ:IMMU) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few fund managers who sold off their positions entirely by the end of the first quarter. At the top of the heap, Jim Simons (founder)’s Renaissance Technologies dumped the largest investment of all the hedgies tracked by Insider Monkey, comprising close to $10.7 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $6.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Immunomedics, Inc. (NASDAQ:IMMU). We will take a look at Pinnacle Financial Partners (NASDAQ:PNFP), Millicom International Cellular S.A. (NASDAQ:TIGO), Clean Harbors Inc (NYSE:CLH), and Stifel Financial Corp. (NYSE:SF). This group of stocks’ market valuations resemble IMMU’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $701 million in IMMU’s case. Clean Harbors Inc (NYSE:CLH) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Immunomedics, Inc. (NASDAQ:IMMU) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on IMMU as the stock returned 162.9% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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