How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Summit Therapeutics PLC (ADR) (NASDAQ:SMMT).
Hedge fund interest in Summit Therapeutics PLC (ADR) (NASDAQ:SMMT) 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 SMMT to other stocks including Cenveo, Inc. (NYSE:CVO), Ignite Restaurant Group Inc (NASDAQ:IRG), and Vince Holding Corp (NYSE:VNCE) to get a better sense of its popularity.
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Keeping this in mind, let’s check out the fresh action regarding Summit Therapeutics PLC (ADR) (NASDAQ:SMMT).
How have hedgies been trading Summit Therapeutics PLC (ADR) (NASDAQ:SMMT)?
Heading into Q4, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among the funds from our database, billionaire Steve Cohen’s Point72 Asset Management reported the largest stake in Summit Therapeutics, which was valued at $9.6 million in stock at the end of September. Point72 was followed by Warren Lammert’s Granite Point Capital, which disclosed a $1.3 million position in the company in its latest 13F filing.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to Summit Therapeutics PLC (ADR) (NASDAQ:SMMT). We will take a look at Cenveo, Inc. (NYSE:CVO), Ignite Restaurant Group Inc (NASDAQ:IRG), Vince Holding Corp (NYSE:VNCE), and Liberator Medical Holdings Inc (NYSEMKT:LBMH). This group of stocks’ market values are similar to SMMT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVO | 9 | 16715 | -3 |
| IRG | 8 | 12508 | 2 |
| VNCE | 18 | 18996 | 1 |
| LBMH | 7 | 12445 | 1 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $15 million, lower than the $22 million in SMMT’s case. Vince Holding Corp (NYSE:VNCE) is the most popular stock in this table, while Liberator Medical Holdings Inc (NYSEMKT:LBMH) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Summit Therapeutics PLC (ADR) (NASDAQ:SMMT) is even less popular than LBMH. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.