We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) in this article.
Hedge fund interest in SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Forty Seven, Inc. (NASDAQ:FTSV), Yext, Inc. (NYSE:YEXT), and Arcos Dorados Holding Inc (NYSE:ARCO) to gather more data points. Our calculations also showed that SWTX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Today there are a multitude of gauges stock market investors can use to appraise their stock investments. Some of the most useful gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can trounce the broader indices by a healthy margin (see the details here).
Samuel Isaly of OrbiMed Advisors
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the new hedge fund action regarding SpringWorks Therapeutics, Inc. (NASDAQ:SWTX).
Hedge fund activity in SpringWorks Therapeutics, Inc. (NASDAQ:SWTX)
At Q4’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SWTX over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) was held by OrbiMed Advisors, which reported holding $285.1 million worth of stock at the end of September. It was followed by Perceptive Advisors with a $128.5 million position. Other investors bullish on the company included Biotechnology Value Fund / BVF Inc, Citadel Investment Group, and Deerfield Management. In terms of the portfolio weights assigned to each position Samsara BioCapital allocated the biggest weight to SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), around 12.05% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, earmarking 8.99 percent of its 13F equity portfolio to SWTX.
Seeing as SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of funds who sold off their entire stakes by the end of the third quarter. Interestingly, Andrew Weiss’s Weiss Asset Management dumped the biggest stake of the 750 funds monitored by Insider Monkey, comprising close to $0.4 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also dumped its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to SpringWorks Therapeutics, Inc. (NASDAQ:SWTX). We will take a look at Forty Seven, Inc. (NASDAQ:FTSV), Yext, Inc. (NYSE:YEXT), Arcos Dorados Holding Inc (NYSE:ARCO), and GCP Applied Technologies Inc. (NYSE:GCP). This group of stocks’ market caps resemble SWTX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FTSV | 18 | 351335 | 9 |
| YEXT | 13 | 47303 | -1 |
| ARCO | 13 | 119314 | -1 |
| GCP | 20 | 400771 | -2 |
| Average | 16 | 229681 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $659 million in SWTX’s case. GCP Applied Technologies Inc. (NYSE:GCP) is the most popular stock in this table. On the other hand Yext, Inc. (NYSE:YEXT) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) is even less popular than YEXT. Hedge funds dodged a bullet by taking a bearish stance towards SWTX. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately SWTX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SWTX investors were disappointed as the stock returned -26.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
