Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Harpoon Therapeutics, Inc. (NASDAQ:HARP).
Is Harpoon Therapeutics, Inc. (NASDAQ:HARP) a worthy stock to buy now? The best stock pickers are in a bullish mood. The number of long hedge fund positions moved up by 2 in recent months. Our calculations also showed that HARP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). HARP was in 8 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with HARP holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most market participants, hedge funds are assumed to be slow, outdated investment tools of the past. While there are greater than 8000 funds with their doors open today, We hone in on the top tier of this club, approximately 750 funds. These investment experts oversee most of the hedge fund industry’s total capital, and by monitoring their first-class equity investments, Insider Monkey has unsheathed a few investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Oleg Nodelman of EcoR1 Capital
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. We’re going to view the latest hedge fund action encompassing Harpoon Therapeutics, Inc. (NASDAQ:HARP).
How are hedge funds trading Harpoon Therapeutics, Inc. (NASDAQ:HARP)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HARP over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the largest position in Harpoon Therapeutics, Inc. (NASDAQ:HARP). OrbiMed Advisors has a $33.4 million position in the stock, comprising 0.6% of its 13F portfolio. The second largest stake is held by EcoR1 Capital, managed by Oleg Nodelman, which holds a $20 million position; the fund has 2.5% of its 13F portfolio invested in the stock. Some other peers that are bullish include Bihua Chen’s Cormorant Asset Management, James E. Flynn’s Deerfield Management and Julian Baker and Felix Baker’s Baker Bros. Advisors. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Harpoon Therapeutics, Inc. (NASDAQ:HARP), around 2.52% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, earmarking 0.63 percent of its 13F equity portfolio to HARP.
Now, key hedge funds have been driving this bullishness. Renaissance Technologies assembled the most outsized position in Harpoon Therapeutics, Inc. (NASDAQ:HARP). Renaissance Technologies 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 million investment in the stock during the quarter. The only other fund with a brand new HARP position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks similar to Harpoon Therapeutics, Inc. (NASDAQ:HARP). These stocks are Peoples Financial Services Corp. (NASDAQ:PFIS), Southern Missouri Bancorp, Inc. (NASDAQ:SMBC), MarineMax, Inc. (NYSE:HZO), and Precision Drilling Corporation (NYSE:PDS). This group of stocks’ market valuations are similar to HARP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFIS | 1 | 3156 | 0 |
| SMBC | 3 | 18268 | 0 |
| HZO | 10 | 5073 | 3 |
| PDS | 12 | 15891 | 4 |
| Average | 6.5 | 10597 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $69 million in HARP’s case. Precision Drilling Corporation (NYSE:PDS) is the most popular stock in this table. On the other hand Peoples Financial Services Corp. (NASDAQ:PFIS) is the least popular one with only 1 bullish hedge fund positions. Harpoon Therapeutics, Inc. (NASDAQ:HARP) 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 HARP as the stock returned 36.9% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
