Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 30 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 6.7% through November 15th whereas the S&P 500 Index ETF gained only 2.6% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Dermira Inc (NASDAQ:DERM) from the perspective of those elite funds.
Dermira Inc (NASDAQ:DERM) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds’ portfolios at the end of September. At the end of this article we will also compare DERM to other stocks including Blackrock MuniYield New York Quality Fund, Inc. (NYSE:MYN), City Office REIT Inc (NYSE:CIO), and ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to check out the fresh hedge fund action regarding Dermira Inc (NASDAQ:DERM).
Hedge fund activity in Dermira Inc (NASDAQ:DERM)
Heading into the fourth quarter of 2018, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DERM over the last 13 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in Dermira Inc (NASDAQ:DERM), which was worth $25.9 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $21.8 million worth of shares. Moreover, OrbiMed Advisors, Polar Capital, and Rock Springs Capital Management were also bullish on Dermira Inc (NASDAQ:DERM), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Dermira Inc (NASDAQ:DERM) has experienced a decline in interest from the smart money, we can see that there lies a certain “tier” of hedgies that slashed their full holdings in the third quarter. At the top of the heap, Behzad Aghazadeh’s venBio Select Advisor said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, comprising an estimated $16.9 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $4.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dermira Inc (NASDAQ:DERM) but similarly valued. These stocks are Blackrock MuniYield New York Quality Fund, Inc. (NYSE:MYN), City Office REIT Inc (NYSE:CIO), ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), and Anworth Mortgage Asset Corporation (NYSE:ANH). All of these stocks’ market caps match DERM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MYN | 2 | 2216 | -1 |
| CIO | 6 | 28732 | -1 |
| ZIOP | 6 | 13475 | 2 |
| ANH | 6 | 29694 | -3 |
| Average | 5 | 18529 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $88 million in DERM’s case. City Office REIT Inc (NYSE:CIO) is the most popular stock in this table. On the other hand Blackrock MuniYield New York Quality Fund, Inc. (NYSE:MYN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Dermira Inc (NASDAQ:DERM) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
