Is Odonate Therapeutics, Inc. (NASDAQ:ODT) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Odonate Therapeutics, Inc. (NASDAQ:ODT) investors should pay attention to an increase in hedge fund interest of late. ODT was in 14 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with ODT positions at the end of the previous quarter. Our calculations also showed that ODT 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus 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 analyze the new hedge fund action encompassing Odonate Therapeutics, Inc. (NASDAQ:ODT).
Hedge fund activity in Odonate Therapeutics, Inc. (NASDAQ:ODT)
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in ODT a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Tang Capital Management, managed by Kevin C. Tang, holds the number one position in Odonate Therapeutics, Inc. (NASDAQ:ODT). Tang Capital Management has a $366.4 million position in the stock, comprising 62.7% of its 13F portfolio. The second most bullish fund manager is Redmile Group, led by Jeremy Green, holding a $20.1 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions comprise Richard Driehaus’s Driehaus Capital, Srini Akkaraju and Michael Dybbs’s Samsara BioCapital and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Tang Capital Management allocated the biggest weight to Odonate Therapeutics, Inc. (NASDAQ:ODT), around 62.68% of its 13F portfolio. Samsara BioCapital is also relatively very bullish on the stock, designating 9.26 percent of its 13F equity portfolio to ODT.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. D E Shaw, managed by David E. Shaw, created the biggest position in Odonate Therapeutics, Inc. (NASDAQ:ODT). D E Shaw had $1.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $0.5 million position during the quarter. The only other fund with a brand new ODT position is Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks similar to Odonate Therapeutics, Inc. (NASDAQ:ODT). We will take a look at Triumph Bancorp Inc (NASDAQ:TBK), Golden Ocean Group Ltd (NASDAQ:GOGL), Stock Yards Bancorp, Inc. (NASDAQ:SYBT), and Lindblad Expeditions Holdings Inc (NASDAQ:LIND). This group of stocks’ market caps are similar to ODT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TBK | 6 | 29347 | -1 |
| GOGL | 7 | 205416 | 0 |
| SYBT | 10 | 15559 | 4 |
| LIND | 18 | 167456 | 3 |
| Average | 10.25 | 104445 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $447 million in ODT’s case. Lindblad Expeditions Holdings Inc (NASDAQ:LIND) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 6 bullish hedge fund positions. Odonate Therapeutics, Inc. (NASDAQ:ODT) 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 ODT as the stock returned 32.1% 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.
