We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Theravance Biopharma Inc (NASDAQ:TBPH) and determine whether hedge funds skillfully traded this stock.
Is Theravance Biopharma Inc (NASDAQ:TBPH) the right pick for your portfolio? The best stock pickers were taking a bullish view. The number of long hedge fund positions moved up by 4 recently. Theravance Biopharma Inc (NASDAQ:TBPH) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TBPH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to take a peek at the latest hedge fund action surrounding Theravance Biopharma Inc (NASDAQ:TBPH).
How are hedge funds trading Theravance Biopharma Inc (NASDAQ:TBPH)?
At second quarter’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TBPH over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Baupost Group, managed by Seth Klarman, holds the largest position in Theravance Biopharma Inc (NASDAQ:TBPH). Baupost Group has a $195.4 million position in the stock, comprising 2.4% of its 13F portfolio. On Baupost Group’s heels is OrbiMed Advisors, led by Samuel Isaly, holding a $53.6 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Traci Lerner’s Chescapmanager LLC, Phill Gross and Robert Atchinson’s Adage Capital Management and David Rosen’s Rubric Capital Management. In terms of the portfolio weights assigned to each position Chescapmanager LLC allocated the biggest weight to Theravance Biopharma Inc (NASDAQ:TBPH), around 4.23% of its 13F portfolio. Baupost Group is also relatively very bullish on the stock, earmarking 2.44 percent of its 13F equity portfolio to TBPH.
Now, some big names have jumped into Theravance Biopharma Inc (NASDAQ:TBPH) headfirst. Hudson Bay Capital Management, managed by Sander Gerber, established the most outsized position in Theravance Biopharma Inc (NASDAQ:TBPH). Hudson Bay Capital Management had $3.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $1.1 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Peter Muller’s PDT Partners, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Theravance Biopharma Inc (NASDAQ:TBPH) but similarly valued. We will take a look at Tri Continental Corporation (NYSE:TY), BancFirst Corporation (NASDAQ:BANF), Retail Opportunity Investments Corp (NASDAQ:ROIC), Axos Financial, Inc. (NYSE:AX), Sorrento Therapeutics Inc (NASDAQ:SRNE), Itau CorpBanca (NYSE:ITCB), and Arvinas, Inc. (NASDAQ:ARVN). This group of stocks’ market caps resemble TBPH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TY | 3 | 1424 | 0 |
| BANF | 13 | 34034 | 1 |
| ROIC | 20 | 88018 | 2 |
| AX | 17 | 45679 | 5 |
| SRNE | 12 | 56365 | 7 |
| ITCB | 1 | 1225 | 0 |
| ARVN | 31 | 310963 | 6 |
| Average | 13.9 | 76815 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $352 million in TBPH’s case. Arvinas, Inc. (NASDAQ:ARVN) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. Theravance Biopharma Inc (NASDAQ:TBPH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TBPH is 67.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately TBPH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TBPH were disappointed as the stock returned -29.6% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Theravance Biopharma Inc. (NASDAQ:TBPH)
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Disclosure: None. This article was originally published at Insider Monkey.
