At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Mereo BioPharma Group plc (NASDAQ:MREO) makes for a good investment right now.
Mereo BioPharma Group plc (NASDAQ:MREO) shareholders have witnessed an increase in hedge fund sentiment lately. Mereo BioPharma Group plc (NASDAQ:MREO) was in 24 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 23 hedge funds in our database with MREO holdings at the end of March. Our calculations also showed that MREO 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.
Noam Gottesman of GLG Partners
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Do Hedge Funds Think MREO Is A Good Stock To Buy Now?
At second quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in MREO over the last 24 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Point72 Asset Management held the most valuable stake in Mereo BioPharma Group plc (NASDAQ:MREO), which was worth $32 million at the end of the second quarter. On the second spot was Suvretta Capital Management which amassed $27.4 million worth of shares. Rubric Capital Management, Rock Springs Capital Management, and Vivo Capital 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 Commodore Capital allocated the biggest weight to Mereo BioPharma Group plc (NASDAQ:MREO), around 2.25% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, earmarking 1.13 percent of its 13F equity portfolio to MREO.
Consequently, key money managers have been driving this bullishness. Logos Capital, managed by Arsani William, assembled the biggest position in Mereo BioPharma Group plc (NASDAQ:MREO). Logos Capital had $0.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.1 million position during the quarter. The only other fund with a new position in the stock is Noam Gottesman’s GLG Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Mereo BioPharma Group plc (NASDAQ:MREO) but similarly valued. We will take a look at Adverum Biotechnologies, Inc. (NASDAQ:ADVM), Kala Pharmaceuticals, Inc. (NASDAQ:KALA), Fulcrum Therapeutics, Inc. (NASDAQ:FULC), Coastal Financial Corporation (NASDAQ:CCB), Village Super Market, Inc. (NASDAQ:VLGEA), Casper Sleep Inc. (NYSE:CSPR), and Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE). This group of stocks’ market valuations match MREO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADVM | 14 | 66723 | -8 |
| KALA | 12 | 91817 | -4 |
| FULC | 14 | 65483 | -3 |
| CCB | 5 | 28237 | 2 |
| VLGEA | 8 | 31437 | 1 |
| CSPR | 11 | 17132 | -2 |
| AGLE | 16 | 139984 | -2 |
| Average | 11.4 | 62973 | -2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.4 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $175 million in MREO’s case. Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) is the most popular stock in this table. On the other hand Coastal Financial Corporation (NASDAQ:CCB) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Mereo BioPharma Group plc (NASDAQ:MREO) is more popular among hedge funds. Our overall hedge fund sentiment score for MREO is 86. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Unfortunately MREO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MREO were disappointed as the stock returned -32.2% since the end of the second quarter (through 10/22) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
