We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether PTC Therapeutics, Inc. (NASDAQ:PTCT) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
PTC Therapeutics, Inc. (NASDAQ:PTCT) was in 34 hedge funds’ portfolios at the end of the fourth quarter of 2019. PTCT has seen a decrease in support from the world’s most elite money managers of late. There were 36 hedge funds in our database with PTCT holdings at the end of the previous quarter. Our calculations also showed that PTCT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Samuel Isaly of OrbiMed Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the latest hedge fund action encompassing PTC Therapeutics, Inc. (NASDAQ:PTCT).
What does smart money think about PTC Therapeutics, Inc. (NASDAQ:PTCT)?
Heading into the first quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PTCT over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Great Point Partners was the largest shareholder of PTC Therapeutics, Inc. (NASDAQ:PTCT), with a stake worth $84.1 million reported as of the end of September. Trailing Great Point Partners was OrbiMed Advisors, which amassed a stake valued at $83.1 million. Citadel Investment Group, Point72 Asset Management, and D E Shaw 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 Great Point Partners allocated the biggest weight to PTC Therapeutics, Inc. (NASDAQ:PTCT), around 7.32% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, setting aside 6.3 percent of its 13F equity portfolio to PTCT.
Judging by the fact that PTC Therapeutics, Inc. (NASDAQ:PTCT) has witnessed falling interest from hedge fund managers, it’s safe to say that there were a few hedgies who were dropping their positions entirely in the third quarter. Intriguingly, Christopher James’s Partner Fund Management dumped the biggest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $55.9 million in stock, and Matt Sirovich and Jeremy Mindich’s Scopia Capital was right behind this move, as the fund dumped about $29.5 million worth. These moves are interesting, as total hedge fund interest dropped by 2 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PTC Therapeutics, Inc. (NASDAQ:PTCT) but similarly valued. These stocks are The Chemours Company (NYSE:CC), Itau CorpBanca (NYSE:ITCB), Acadia Healthcare Company Inc (NASDAQ:ACHC), and Methanex Corporation (NASDAQ:MEOH). This group of stocks’ market valuations match PTCT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CC | 29 | 332478 | -1 |
| ITCB | 1 | 2800 | 0 |
| ACHC | 28 | 655188 | 6 |
| MEOH | 16 | 195583 | 0 |
| Average | 18.5 | 296512 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $606 million in PTCT’s case. The Chemours Company (NYSE:CC) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks PTC Therapeutics, Inc. (NASDAQ:PTCT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still managed to beat the market by 5.5 percentage points. Hedge funds were also right about betting on PTCT as the stock returned -13.1% so far in Q1 (through March 25th) 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
