Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Larimar Therapeutics, Inc. (NASDAQ:LRMR) based on that data and determine whether they were really smart about the stock.
Larimar Therapeutics, Inc. (NASDAQ:LRMR) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 20. LRMR investors should be aware of an increase in enthusiasm from smart money in recent months. There were 15 hedge funds in our database with LRMR holdings at the end of March. Our calculations also showed that LRMR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Kolchinsky of RA Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let’s take a look at the key hedge fund action surrounding Larimar Therapeutics, Inc. (NASDAQ:LRMR).
How are hedge funds trading Larimar Therapeutics, Inc. (NASDAQ:LRMR)?
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the first quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in LRMR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Deerfield Management held the most valuable stake in Larimar Therapeutics, Inc. (NASDAQ:LRMR), which was worth $66.1 million at the end of the third quarter. On the second spot was RA Capital Management which amassed $19.5 million worth of shares. OrbiMed Advisors, Vivo Capital, and Acuta Capital Partners 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 Acuta Capital Partners allocated the biggest weight to Larimar Therapeutics, Inc. (NASDAQ:LRMR), around 2.97% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, designating 1.93 percent of its 13F equity portfolio to LRMR.
Now, key money managers have jumped into Larimar Therapeutics, Inc. (NASDAQ:LRMR) headfirst. Deerfield Management, managed by James E. Flynn, initiated the biggest position in Larimar Therapeutics, Inc. (NASDAQ:LRMR). Deerfield Management had $66.1 million invested in the company at the end of the quarter. Peter Kolchinsky’s RA Capital Management also made a $19.5 million investment in the stock during the quarter. The following funds were also among the new LRMR investors: Albert Cha and Frank Kung’s Vivo Capital, Richard Driehaus’s Driehaus Capital, and Arsani William’s Logos Capital.
Let’s go over hedge fund activity in other stocks similar to Larimar Therapeutics, Inc. (NASDAQ:LRMR). These stocks are Escalade, Inc. (NASDAQ:ESCA), RGC Resources, Inc. (NASDAQ:RGCO), The Cato Corporation (NYSE:CATO), Professional Holding Corp. (NASDAQ:PFHD), Bluerock Residential Growth REIT Inc (NYSE:BRG), Cinedigm Corp (NASDAQ:CIDM), and StarTek, Inc. (NYSE:SRT). This group of stocks’ market valuations are similar to LRMR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ESCA | 8 | 14029 | 5 |
| RGCO | 2 | 2451 | 1 |
| CATO | 12 | 16999 | 2 |
| PFHD | 4 | 13643 | -1 |
| BRG | 9 | 13134 | -1 |
| CIDM | 4 | 2480 | 3 |
| SRT | 3 | 4015 | -1 |
| Average | 6 | 9536 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $140 million in LRMR’s case. The Cato Corporation (NYSE:CATO) is the most popular stock in this table. On the other hand RGC Resources, Inc. (NASDAQ:RGCO) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Larimar Therapeutics, Inc. (NASDAQ:LRMR) is more popular among hedge funds. Our overall hedge fund sentiment score for LRMR is 85. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 24.8% in 2020 through the end of September but still managed to beat the market by 19.3 percentage points. Hedge funds were also right about betting on LRMR as the stock returned 18.1% since the end of June 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.
Follow Larimar Therapeutics Inc. (NASDAQ:LRMR)
Follow Larimar Therapeutics Inc. (NASDAQ:LRMR)
Disclosure: None. This article was originally published at Insider Monkey.