In this article you are going to find out whether hedge funds think Mereo BioPharma Group plc (NASDAQ:MREO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Mereo BioPharma Group plc (NASDAQ:MREO) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. MREO shareholders have witnessed a decrease in support from the world’s most elite money managers of late. There were 24 hedge funds in our database with MREO holdings at the end of June. Our calculations also showed that MREO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now we’re going to check out the latest hedge fund action surrounding Mereo BioPharma Group plc (NASDAQ:MREO).
Steven Cohen of Point72 Asset Management
Do Hedge Funds Think MREO Is A Good Stock To Buy Now?
At third quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in MREO a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, OrbiMed Advisors was the largest shareholder of Mereo BioPharma Group plc (NASDAQ:MREO), with a stake worth $41.8 million reported as of the end of September. Trailing OrbiMed Advisors was Rubric Capital Management, which amassed a stake valued at $27.3 million. Point72 Asset Management, Suvretta Capital Management, and Vivo 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 Commodore Capital allocated the biggest weight to Mereo BioPharma Group plc (NASDAQ:MREO), around 1.26% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, setting aside 0.76 percent of its 13F equity portfolio to MREO.
Since Mereo BioPharma Group plc (NASDAQ:MREO) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds who were dropping their entire stakes last quarter. Intriguingly, Joseph Edelman’s Perceptive Advisors sold off the biggest stake of the 750 funds followed by Insider Monkey, comprising close to $5.4 million in stock. Efrem Kamen’s fund, Pura Vida Investments, also dumped its stock, about $0.6 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mereo BioPharma Group plc (NASDAQ:MREO) but similarly valued. We will take a look at Sanara MedTech Inc. (NASDAQ:SMTI), Parke Bancorp, Inc. (NASDAQ:PKBK), Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT), CyberOptics Corporation (NASDAQ:CYBE), GasLog Partners LP (NYSE:GLOP), Apollo Endosurgery, Inc. (NASDAQ:APEN), and Escalade, Inc. (NASDAQ:ESCA). All of these stocks’ market caps are closest to MREO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMTI | 5 | 4255 | 0 |
| PKBK | 4 | 22057 | -1 |
| SBT | 5 | 2843 | 0 |
| CYBE | 11 | 34738 | -3 |
| GLOP | 9 | 9591 | 1 |
| APEN | 10 | 61732 | 1 |
| ESCA | 4 | 9581 | 0 |
| Average | 6.9 | 20685 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.9 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $193 million in MREO’s case. CyberOptics Corporation (NASDAQ:CYBE) is the most popular stock in this table. On the other hand Parke Bancorp, Inc. (NASDAQ:PKBK) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Mereo BioPharma Group plc (NASDAQ:MREO) is more popular among hedge funds. Our overall hedge fund sentiment score for MREO is 80.5. 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 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately MREO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MREO were disappointed as the stock returned -33.9% since the end of the third quarter (through 12/31) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
