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 Principia Biopharma Inc. (NASDAQ:PRNB) and determine whether hedge funds skillfully traded this stock.
Is Principia Biopharma Inc. (NASDAQ:PRNB) an excellent investment today? Hedge funds were taking a bullish view. The number of long hedge fund bets advanced by 5 in recent months. Principia Biopharma Inc. (NASDAQ:PRNB) was in 26 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PRNB 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). There were 21 hedge funds in our database with PRNB holdings at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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David E. Shaw of D.E. Shaw
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 look at the fresh hedge fund action encompassing Principia Biopharma Inc. (NASDAQ:PRNB).
How are hedge funds trading Principia Biopharma Inc. (NASDAQ:PRNB)?
At the end of June, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PRNB over the last 20 quarters. So, let’s check out 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, Redmile Group, managed by Jeremy Green, holds the number one position in Principia Biopharma Inc. (NASDAQ:PRNB). Redmile Group has a $162.2 million position in the stock, comprising 3% of its 13F portfolio. Coming in second is Cormorant Asset Management, led by Bihua Chen, holding a $95.1 million position; the fund has 3.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Julian Baker and Felix Baker’s Baker Bros. Advisors, Mark Lampert’s Biotechnology Value Fund / BVF Inc and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Samsara BioCapital allocated the biggest weight to Principia Biopharma Inc. (NASDAQ:PRNB), around 6.6% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, dishing out 5.47 percent of its 13F equity portfolio to PRNB.
Consequently, key hedge funds were breaking ground themselves. Logos Capital, managed by Arsani William, assembled the most outsized position in Principia Biopharma Inc. (NASDAQ:PRNB). Logos Capital had $9 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $2.4 million position during the quarter. The other funds with new positions in the stock are Parvinder Thiara’s Athanor Capital, Andre F. Perold’s HighVista Strategies, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s now review hedge fund activity in other stocks similar to Principia Biopharma Inc. (NASDAQ:PRNB). These stocks are AssetMark Financial Holdings, Inc. (NYSE:AMK), Cimpress plc (NASDAQ:CMPR), Select Medical Holdings Corporation (NYSE:SEM), Yext, Inc. (NYSE:YEXT), National Storage Affiliates Trust (NYSE:NSA), Golub Capital BDC Inc (NASDAQ:GBDC), and Akebia Therapeutics Inc (NASDAQ:AKBA). This group of stocks’ market caps are similar to PRNB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMK | 6 | 29052 | 2 |
| CMPR | 25 | 269870 | 6 |
| SEM | 22 | 93345 | 4 |
| YEXT | 10 | 31408 | 1 |
| NSA | 13 | 54586 | -5 |
| GBDC | 16 | 42799 | 3 |
| AKBA | 25 | 618091 | 7 |
| Average | 16.7 | 162736 | 2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.7 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $654 million in PRNB’s case. Cimpress plc (NASDAQ:CMPR) is the most popular stock in this table. On the other hand AssetMark Financial Holdings, Inc. (NYSE:AMK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Principia Biopharma Inc. (NASDAQ:PRNB) is more popular among hedge funds. Our overall hedge fund sentiment score for PRNB is 90. 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. 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 returned 21.3% in 2020 through September 25th but still managed to beat the market by 17.7 percentage points. Hedge funds were also right about betting on PRNB as the stock returned 67.3% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
