We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is PTC Therapeutics, Inc. (NASDAQ:PTCT) a good investment right now? Investors who are in the know are becoming more confident. The number of bullish hedge fund positions rose by 6 lately. Our calculations also showed that PTCT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). PTCT was in 34 hedge funds’ portfolios at the end of September. There were 28 hedge funds in our database with PTCT holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Steven Cohen of Point72 Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding PTC Therapeutics, Inc. (NASDAQ:PTCT).
Hedge fund activity in PTC Therapeutics, Inc. (NASDAQ:PTCT)
Heading into the fourth quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PTCT over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in PTC Therapeutics, Inc. (NASDAQ:PTCT) was held by Point72 Asset Management, which reported holding $80.8 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $73.4 million position. Other investors bullish on the company included Great Point Partners, OrbiMed Advisors, and Partner Fund Management. In terms of the portfolio weights assigned to each position TPG-AXON Management LP allocated the biggest weight to PTC Therapeutics, Inc. (NASDAQ:PTCT), around 17.97% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, dishing out 6.21 percent of its 13F equity portfolio to PTCT.
Consequently, some big names were leading the bulls’ herd. Partner Fund Management, managed by Christopher James, assembled the biggest position in PTC Therapeutics, Inc. (NASDAQ:PTCT). Partner Fund Management had $55.9 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $13.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace, Jonathan Barrett and Paul Segal’s Luminus Management, and Steven Boyd’s Armistice Capital.
Let’s check out hedge fund activity in other stocks similar to PTC Therapeutics, Inc. (NASDAQ:PTCT). These stocks are National Storage Affiliates Trust (NYSE:NSA), NovaGold Resources Inc. (NYSE:NG), Euronav NV (NYSE:EURN), and Cannae Holdings, Inc. (NYSE:CNNE). This group of stocks’ market values match PTCT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NSA | 15 | 137737 | -3 |
| NG | 16 | 211750 | 6 |
| EURN | 18 | 138289 | 2 |
| CNNE | 19 | 241748 | 0 |
| Average | 17 | 182381 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $558 million in PTCT’s case. Cannae Holdings, Inc. (NYSE:CNNE) is the most popular stock in this table. On the other hand National Storage Affiliates Trust (NYSE:NSA) is the least popular one with only 15 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on PTCT as the stock returned 43.7% so far in 2019 (through 12/23) 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.
