Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Turning Point Therapeutics, Inc. (NASDAQ:TPTX) a healthy stock for your portfolio? The smart money is in a bullish mood. The number of long hedge fund positions moved up by 15 recently. Our calculations also showed that TPTX 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.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely 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 new hedge fund action encompassing Turning Point Therapeutics, Inc. (NASDAQ:TPTX).
How have hedgies been trading Turning Point Therapeutics, Inc. (NASDAQ:TPTX)?
Heading into the third quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15 from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in TPTX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Bihua Chen’s Cormorant Asset Management has the biggest position in Turning Point Therapeutics, Inc. (NASDAQ:TPTX), worth close to $127.1 million, accounting for 7.3% of its total 13F portfolio. On Cormorant Asset Management’s heels is OrbiMed Advisors, led by Samuel Isaly, holding a $104.5 million position; 1.6% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish comprise Panayotis Takis Sparaggis’s Alkeon Capital Management, Joseph Edelman’s Perceptive Advisors and James E. Flynn’s Deerfield Management.
As one would reasonably expect, key money managers have been driving this bullishness. Cormorant Asset Management, managed by Bihua Chen, established the most outsized position in Turning Point Therapeutics, Inc. (NASDAQ:TPTX). Cormorant Asset Management had $127.1 million invested in the company at the end of the quarter. Samuel Isaly’s OrbiMed Advisors also initiated a $104.5 million position during the quarter. The other funds with brand new TPTX positions are Panayotis Takis Sparaggis’s Alkeon Capital Management, Joseph Edelman’s Perceptive Advisors, and James E. Flynn’s Deerfield Management.
Let’s also examine hedge fund activity in other stocks similar to Turning Point Therapeutics, Inc. (NASDAQ:TPTX). These stocks are Viad Corp (NYSE:VVI), B&G Foods, Inc. (NYSE:BGS), Virtusa Corporation (NASDAQ:VRTU), and Grupo Simec S.A.B. de C.V. (NYSE:SIM). This group of stocks’ market values are closest to TPTX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VVI | 16 | 120247 | 3 |
| BGS | 20 | 121608 | 1 |
| VRTU | 13 | 56606 | 3 |
| SIM | 1 | 2045 | -1 |
| Average | 12.5 | 75127 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $323 million in TPTX’s case. B&G Foods, Inc. (NYSE:BGS) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 1 bullish hedge fund positions. Turning Point Therapeutics, Inc. (NASDAQ:TPTX) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 TPTX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TPTX were disappointed as the stock returned -7.6% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.