Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Ovid Therapeutics Inc. (NASDAQ:OVID) investors should be aware of an increase in hedge fund interest lately. Our calculations also showed that OVID isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s go over the latest hedge fund action encompassing Ovid Therapeutics Inc. (NASDAQ:OVID).
Hedge fund activity in Ovid Therapeutics Inc. (NASDAQ:OVID)
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OVID over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Biotechnology Value Fund was the largest shareholder of Ovid Therapeutics Inc. (NASDAQ:OVID), with a stake worth $7.5 million reported as of the end of September. Trailing Biotechnology Value Fund was Renaissance Technologies, which amassed a stake valued at $1.9 million. Granite Point Capital, AWH Capital, and Platinum Asset 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 AWH Capital allocated the biggest weight to Ovid Therapeutics Inc. (NASDAQ:OVID), around 1.06% of its 13F portfolio. Biotechnology Value Fund is also relatively very bullish on the stock, earmarking 0.79 percent of its 13F equity portfolio to OVID.
As aggregate interest increased, key money managers have jumped into Ovid Therapeutics Inc. (NASDAQ:OVID) headfirst. Platinum Asset Management, managed by Kerr Neilson, assembled the most valuable position in Ovid Therapeutics Inc. (NASDAQ:OVID). Platinum Asset Management had $0.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new OVID position is David Harding’s Winton Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Ovid Therapeutics Inc. (NASDAQ:OVID). These stocks are Old Point Financial Corporation (NASDAQ:OPOF), MEI Pharma Inc (NASDAQ:MEIP), Pointer Telocation Limited (NASDAQ:PNTR), and COMSCORE, Inc. (NASDAQ:SCOR). This group of stocks’ market valuations match OVID’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OPOF | 3 | 2797 | 1 |
| MEIP | 13 | 29548 | 0 |
| PNTR | 2 | 5370 | -2 |
| SCOR | 18 | 38378 | 1 |
| Average | 9 | 19023 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $13 million in OVID’s case. COMSCORE, Inc. (NASDAQ:SCOR) is the most popular stock in this table. On the other hand Pointer Telocation Limited (NASDAQ:PNTR) is the least popular one with only 2 bullish hedge fund positions. Ovid Therapeutics Inc. (NASDAQ:OVID) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on OVID as the stock returned 31.5% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
