We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Turning Point Therapeutics, Inc. (NASDAQ:TPTX) investors should be aware of an increase in hedge fund sentiment of late. TPTX was in 19 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with TPTX positions at the end of the previous quarter. Our calculations also showed that TPTX 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.
Samuel Isaly of OrbiMed Advisors
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 as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to check out the recent hedge fund action regarding Turning Point Therapeutics, Inc. (NASDAQ:TPTX).
What have hedge funds been doing with Turning Point Therapeutics, Inc. (NASDAQ:TPTX)?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in TPTX over the last 17 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Cormorant Asset Management held the most valuable stake in Turning Point Therapeutics, Inc. (NASDAQ:TPTX), which was worth $133.2 million at the end of the third quarter. On the second spot was OrbiMed Advisors which amassed $103.2 million worth of shares. Perceptive Advisors, Alkeon Capital Management, and Deerfield 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 Cormorant Asset Management allocated the biggest weight to Turning Point Therapeutics, Inc. (NASDAQ:TPTX), around 8.11% of its 13F portfolio. Opaleye Management is also relatively very bullish on the stock, setting aside 3.91 percent of its 13F equity portfolio to TPTX.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Opaleye Management, managed by James A. Silverman, initiated the most outsized position in Turning Point Therapeutics, Inc. (NASDAQ:TPTX). Opaleye Management had $10.8 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $10.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Jeffrey Jay and David Kroin’s Great Point Partners, Ken Greenberg and David Kim’s Ghost Tree Capital, and Behzad Aghazadeh’s venBio Select Advisor.
Let’s also examine hedge fund activity in other stocks similar to Turning Point Therapeutics, Inc. (NASDAQ:TPTX). These stocks are 1st Source Corporation (NASDAQ:SRCE), Par Pacific Holdings, Inc. (NYSE:PARR), Delphi Technologies PLC (NYSE:DLPH), and Clear Channel Outdoor Holdings, Inc. (NYSE:CCO). This group of stocks’ market caps match TPTX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRCE | 8 | 29774 | 2 |
| PARR | 15 | 106837 | 1 |
| DLPH | 19 | 195756 | -6 |
| CCO | 43 | 334472 | 11 |
| Average | 21.25 | 166710 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $167 million. That figure was $361 million in TPTX’s case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand 1st Source Corporation (NASDAQ:SRCE) is the least popular one with only 8 bullish hedge fund positions. Turning Point Therapeutics, Inc. (NASDAQ:TPTX) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on TPTX as the stock returned 49.5% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
