After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Chiasma Inc (NASDAQ:CHMA).
Chiasma Inc (NASDAQ:CHMA) was in 11 hedge funds’ portfolios at the end of the third quarter of 2019. CHMA has seen an increase in enthusiasm from smart money of late. There were 7 hedge funds in our database with CHMA positions at the end of the previous quarter. Our calculations also showed that CHMA 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Oleg Nodelman of EcoR1 Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the latest hedge fund action regarding Chiasma Inc (NASDAQ:CHMA).
How are hedge funds trading Chiasma Inc (NASDAQ:CHMA)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 57% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CHMA over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, EcoR1 Capital was the largest shareholder of Chiasma Inc (NASDAQ:CHMA), with a stake worth $15.1 million reported as of the end of September. Trailing EcoR1 Capital was Adage Capital Management, which amassed a stake valued at $11.9 million. Vivo Capital, Point72 Asset Management, and Rock Springs Capital 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 EcoR1 Capital allocated the biggest weight to Chiasma Inc (NASDAQ:CHMA), around 1.9% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, designating 0.91 percent of its 13F equity portfolio to CHMA.
As industrywide interest jumped, specific money managers were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the largest position in Chiasma Inc (NASDAQ:CHMA). Adage Capital Management had $11.9 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $8 million investment in the stock during the quarter. The following funds were also among the new CHMA investors: Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management, and David Harding’s Winton Capital Management.
Let’s now review hedge fund activity in other stocks similar to Chiasma Inc (NASDAQ:CHMA). We will take a look at KalVista Pharmaceuticals, Inc. (NASDAQ:KALV), Viveve Medical, Inc. (NASDAQ:VIVE), Stealth BioTherapeutics Corp (NASDAQ:MITO), and Palatin Technologies, Inc. (NYSE:PTN). This group of stocks’ market valuations are similar to CHMA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KALV | 15 | 59982 | 0 |
| VIVE | 1 | 3 | -2 |
| MITO | 2 | 2539 | 0 |
| PTN | 6 | 2225 | 1 |
| Average | 6 | 16187 | -0.25 |
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 $16 million. That figure was $53 million in CHMA’s case. KalVista Pharmaceuticals, Inc. (NASDAQ:KALV) is the most popular stock in this table. On the other hand Viveve Medical, Inc. (NASDAQ:VIVE) is the least popular one with only 1 bullish hedge fund positions. Chiasma Inc (NASDAQ:CHMA) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on CHMA, though not to the same extent, as the stock returned 8.1% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
