We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Puma Biotechnology Inc (NYSE:PBYI).
Hedge fund interest in Puma Biotechnology Inc (NYSE:PBYI) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare PBYI to other stocks including Prevail Therapeutics Inc. (NASDAQ:PRVL), Rosetta Stone Inc (NYSE:RST), and Equity Bancshares, Inc. (NASDAQ:EQBK) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are numerous signals market participants have at their disposal to analyze stocks. A pair of the less utilized signals are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace the S&P 500 by a healthy amount (see the details here).
Alex Denner of Sarissa Capital
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 take a look at the fresh hedge fund action surrounding Puma Biotechnology Inc (NYSE:PBYI).
How are hedge funds trading Puma Biotechnology Inc (NASDAQ:PBYI)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in PBYI a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Christopher James’s Partner Fund Management has the largest position in Puma Biotechnology Inc (NASDAQ:PBYI), worth close to $39.7 million, corresponding to 1.2% of its total 13F portfolio. The second most bullish fund manager is Alex Denner of Sarissa Capital Management, with a $15.3 million position; 1.9% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish include William Leland Edwards’s Palo Alto Investors, Israel Englander’s Millennium Management and Samuel Isaly’s OrbiMed Advisors. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Puma Biotechnology Inc (NASDAQ:PBYI), around 1.91% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, dishing out 1.17 percent of its 13F equity portfolio to PBYI.
Judging by the fact that Puma Biotechnology Inc (NASDAQ:PBYI) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedgies that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Renaissance Technologies cut the largest stake of all the hedgies tracked by Insider Monkey, worth close to $3.2 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $1.2 million worth. These moves are interesting, 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 Puma Biotechnology Inc (NASDAQ:PBYI) but similarly valued. These stocks are Prevail Therapeutics Inc. (NASDAQ:PRVL), Rosetta Stone Inc (NYSE:RST), Equity Bancshares, Inc. (NASDAQ:EQBK), and Merus N.V. (NASDAQ:MRUS). All of these stocks’ market caps are similar to PBYI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRVL | 9 | 270707 | -2 |
| RST | 15 | 79812 | 3 |
| EQBK | 6 | 41823 | 1 |
| MRUS | 8 | 139433 | 1 |
| Average | 9.5 | 132944 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $120 million in PBYI’s case. Rosetta Stone Inc (NYSE:RST) is the most popular stock in this table. On the other hand Equity Bancshares, Inc. (NASDAQ:EQBK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Puma Biotechnology Inc (NASDAQ:PBYI) is more popular among hedge funds. 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. Unfortunately PBYI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PBYI were disappointed as the stock returned -11.9% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
