World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Odonate Therapeutics, Inc. (NASDAQ:ODT) ready to rally soon? Investors who are in the know are in a bullish mood. The number of bullish hedge fund positions went up by 4 in recent months. Our calculations also showed that ODT isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the latest hedge fund action surrounding Odonate Therapeutics, Inc. (NASDAQ:ODT).
What does smart money think about Odonate Therapeutics, Inc. (NASDAQ:ODT)?
At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ODT over the last 16 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Kevin C. Tang’s Tang Capital Management has the number one position in Odonate Therapeutics, Inc. (NASDAQ:ODT), worth close to $516.4 million, corresponding to 69.8% of its total 13F portfolio. The second largest stake is held by Jeremy Green of Redmile Group, with a $27.2 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Srini Akkaraju and Michael Dybbs’s Samsara BioCapital, Richard Driehaus’s Driehaus Capital and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management.
As one would reasonably expect, specific money managers were breaking ground themselves. RA Capital Management, managed by Peter Kolchinsky, established the largest position in Odonate Therapeutics, Inc. (NASDAQ:ODT). RA Capital Management had $7.3 million invested in the company at the end of the quarter. Ken Greenberg and David Kim’s Ghost Tree Capital also initiated a $2.4 million position during the quarter. The other funds with brand new ODT positions are Anand Parekh’s Alyeska Investment Group and Israel Englander’s Millennium Management.
Let’s now take a look at hedge fund activity in other stocks similar to Odonate Therapeutics, Inc. (NASDAQ:ODT). We will take a look at Eldorado Gold Corp (NYSE:EGO), Sonic Automotive Inc (NYSE:SAH), Upland Software Inc (NASDAQ:UPLD), and Meridian Bancorp, Inc. (NASDAQ:EBSB). This group of stocks’ market values match ODT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EGO | 10 | 61879 | -1 |
| SAH | 11 | 26993 | 0 |
| UPLD | 24 | 202112 | -4 |
| EBSB | 11 | 83875 | -4 |
| Average | 14 | 93715 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $634 million in ODT’s case. Upland Software Inc (NASDAQ:UPLD) is the most popular stock in this table. On the other hand Eldorado Gold Corp (NYSE:EGO) is the least popular one with only 10 bullish hedge fund positions. Odonate Therapeutics, Inc. (NASDAQ:ODT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ODT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ODT investors were disappointed as the stock returned -29.1% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
