In this article we will check out the progression of hedge fund sentiment towards Kodiak Sciences Inc (NASDAQ:KOD) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Kodiak Sciences Inc (NASDAQ:KOD) a buy here? The smart money was taking a bearish view. The number of bullish hedge fund bets dropped by 5 in recent months. Kodiak Sciences Inc (NASDAQ:KOD) was in 12 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 20. Our calculations also showed that KOD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Lei Zhang of Hillhouse Capital Management
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 are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a gander at the fresh hedge fund action surrounding Kodiak Sciences Inc (NASDAQ:KOD).
Do Hedge Funds Think KOD Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in KOD over the last 24 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Baker Bros. Advisors held the most valuable stake in Kodiak Sciences Inc (NASDAQ:KOD), which was worth $1314.8 million at the end of the second quarter. On the second spot was Hillhouse Capital Management which amassed $75.3 million worth of shares. Perceptive Advisors, Osterweis Capital Management, and Two Sigma Advisors 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 Baker Bros. Advisors allocated the biggest weight to Kodiak Sciences Inc (NASDAQ:KOD), around 5.77% of its 13F portfolio. Hillhouse Capital Management is also relatively very bullish on the stock, dishing out 0.78 percent of its 13F equity portfolio to KOD.
Seeing as Kodiak Sciences Inc (NASDAQ:KOD) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few fund managers who were dropping their entire stakes heading into Q3. It’s worth mentioning that Bob Peck and Andy Raab’s FPR Partners said goodbye to the largest position of the 750 funds tracked by Insider Monkey, totaling an estimated $40 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund sold off about $3.8 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds heading into Q3.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kodiak Sciences Inc (NASDAQ:KOD) but similarly valued. We will take a look at Lazard Ltd (NYSE:LAZ), The Ensign Group, Inc. (NASDAQ:ENSG), CareDx, Inc. (NASDAQ:CDNA), National Fuel Gas Company (NYSE:NFG), Air Lease Corp (NYSE:AL), RLI Corp. (NYSE:RLI), and Blackstone Mortgage Trust Inc (NYSE:BXMT). This group of stocks’ market caps are closest to KOD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAZ | 18 | 785758 | -1 |
| ENSG | 17 | 85581 | 4 |
| CDNA | 28 | 1019253 | 5 |
| NFG | 12 | 132151 | -4 |
| AL | 22 | 677778 | -5 |
| RLI | 15 | 195173 | 1 |
| BXMT | 12 | 185212 | -4 |
| Average | 17.7 | 440129 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $440 million. That figure was $1462 million in KOD’s case. CareDx, Inc. (NASDAQ:CDNA) is the most popular stock in this table. On the other hand National Fuel Gas Company (NYSE:NFG) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Kodiak Sciences Inc (NASDAQ:KOD) is even less popular than NFG. Our overall hedge fund sentiment score for KOD is 18. 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. Hedge funds clearly dropped the ball on KOD as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 through November 5th and still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on KOD as the stock returned 32.8% since Q2 (through November 5th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
