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 Verastem Inc (NASDAQ:VSTM) based on that data and determine whether they were really smart about the stock.
Is Verastem Inc (NASDAQ:VSTM) a bargain? Investors who are in the know were taking a bullish view. The number of bullish hedge fund bets advanced by 1 recently. Verastem Inc (NASDAQ:VSTM) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VSTM 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.
Oleg Nodelman of EcoR1 Capital
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. With all of this in mind let’s review the recent hedge fund action regarding Verastem Inc (NASDAQ:VSTM).
How have hedgies been trading Verastem Inc (NASDAQ:VSTM)?
At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VSTM over the last 20 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, RA Capital Management was the largest shareholder of Verastem Inc (NASDAQ:VSTM), with a stake worth $15.7 million reported as of the end of September. Trailing RA Capital Management was Biotechnology Value Fund / BVF Inc, which amassed a stake valued at $8.7 million. Vivo Capital, Acuta Capital Partners, and Millennium Management 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 Verastem Inc (NASDAQ:VSTM), around 1.32% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, setting aside 0.57 percent of its 13F equity portfolio to VSTM.
Consequently, specific money managers have been driving this bullishness. Pura Vida Investments, managed by Efrem Kamen, assembled the biggest position in Verastem Inc (NASDAQ:VSTM). Pura Vida Investments had $0.9 million invested in the company at the end of the quarter. Andre F. Perold’s HighVista Strategies also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Chen Tianqiao’s Shanda Asset Management, Parvinder Thiara’s Athanor Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to Verastem Inc (NASDAQ:VSTM). We will take a look at Spero Therapeutics (NASDAQ:SPRO), Sutro Biopharma, Inc. (NASDAQ:STRO), Neptune Wellness Solutions Inc (NASDAQ:NEPT), Griffin Industrial Realty, Inc. (NASDAQ:GRIF), Oppenheimer Holdings Inc. (NYSE:OPY), TrueCar Inc (NASDAQ:TRUE), and Nautilus, Inc. (NYSE:NLS). All of these stocks’ market caps are similar to VSTM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPRO | 8 | 46744 | 1 |
| STRO | 20 | 105602 | 7 |
| NEPT | 2 | 51779 | -2 |
| GRIF | 4 | 39507 | 0 |
| OPY | 8 | 22736 | -1 |
| TRUE | 17 | 50385 | 5 |
| NLS | 12 | 44522 | 2 |
| Average | 10.1 | 51611 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $51 million in VSTM’s case. Sutro Biopharma, Inc. (NASDAQ:STRO) is the most popular stock in this table. On the other hand Neptune Wellness Solutions Inc (NASDAQ:NEPT) is the least popular one with only 2 bullish hedge fund positions. Verastem Inc (NASDAQ:VSTM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VSTM is 80.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately VSTM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VSTM were disappointed as the stock returned -29.7% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
