Hedge Fund Sentiment Is Stagnant On IMARA Inc. (IMRA)

In this article we will analyze whether IMARA Inc. (NASDAQ:IMRA) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

IMARA Inc. (NASDAQ:IMRA) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that IMRA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Bogota Financial Corp. (NASDAQ:BSBK), Anixa Biosciences, Inc. (NASDAQ:ANIX), and County Bancorp, Inc. (NASDAQ:ICBK) to gather more data points.

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 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 S&P 500 ETFs by 115 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 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.

Peter Kolchinsky of RA Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Now let’s take a gander at the recent hedge fund action regarding IMARA Inc. (NASDAQ:IMRA).

Do Hedge Funds Think IMRA Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IMRA over the last 23 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.

The largest stake in IMARA Inc. (NASDAQ:IMRA) was held by OrbiMed Advisors, which reported holding $23 million worth of stock at the end of December. It was followed by RA Capital Management with a $2.1 million position. Other investors bullish on the company included Deerfield Management, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position OrbiMed Advisors allocated the biggest weight to IMARA Inc. (NASDAQ:IMRA), around 0.21% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to IMRA.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Rock Springs Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Two Sigma Advisors).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as IMARA Inc. (NASDAQ:IMRA) but similarly valued. We will take a look at Bogota Financial Corp. (NASDAQ:BSBK), Anixa Biosciences, Inc. (NASDAQ:ANIX), County Bancorp, Inc. (NASDAQ:ICBK), Vericity, Inc. (NASDAQ:VERY), Charah Solutions, Inc. (NYSE:CHRA), Mediwound Ltd (NASDAQ:MDWD), and Molecular Data Inc. (NASDAQ:MKD). All of these stocks’ market caps are similar to IMRA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.7 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $26 million in IMRA’s case. Charah Solutions, Inc. (NYSE:CHRA) is the most popular stock in this table. On the other hand Bogota Financial Corp. (NASDAQ:BSBK) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks IMARA Inc. (NASDAQ:IMRA) is more popular among hedge funds. Our overall hedge fund sentiment score for IMRA is 73.8. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately IMRA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IMRA were disappointed as the stock returned -11% since the end of the first quarter (through 6/18) 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.

Disclosure: None. This article was originally published at Insider Monkey.