In this article we will take a look at whether hedge funds think Verastem Inc (NASDAQ:VSTM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Verastem Inc (NASDAQ:VSTM) worth your attention right now? The smart money is buying. The number of bullish hedge fund positions advanced by 9 in recent months. Our calculations also showed that VSTM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). VSTM was in 17 hedge funds’ portfolios at the end of March. There were 8 hedge funds in our database with VSTM holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are plenty of metrics stock traders employ to size up stocks. A pair of the best metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite money managers can trounce the market by a very impressive amount (see the details here).
Peter Kolchinsky of RA Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the key hedge fund action surrounding Verastem Inc (NASDAQ:VSTM).
What have hedge funds been doing with Verastem Inc (NASDAQ:VSTM)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 113% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VSTM over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, RA Capital Management held the most valuable stake in Verastem Inc (NASDAQ:VSTM), which was worth $49.1 million at the end of the third quarter. On the second spot was Vivo Capital which amassed $21.5 million worth of shares. Biotechnology Value Fund / BVF Inc, Point72 Asset Management, and Ikarian Capital 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 Acuta Capital Partners allocated the biggest weight to Verastem Inc (NASDAQ:VSTM), around 4.6% of its 13F portfolio. Logos Capital is also relatively very bullish on the stock, designating 2.1 percent of its 13F equity portfolio to VSTM.
Consequently, key hedge funds were leading the bulls’ herd. RA Capital Management, managed by Peter Kolchinsky, created the biggest position in Verastem Inc (NASDAQ:VSTM). RA Capital Management had $49.1 million invested in the company at the end of the quarter. Albert Cha and Frank Kung’s Vivo Capital also made a $21.5 million investment in the stock during the quarter. The following funds were also among the new VSTM investors: Steve Cohen’s Point72 Asset Management, Neil Shahrestani’s Ikarian Capital, and Farallon Capital.
Let’s now review hedge fund activity in other stocks similar to Verastem Inc (NASDAQ:VSTM). These stocks are FRP Holdings Inc (NASDAQ:FRPH), Bridge Bancorp, Inc. (NASDAQ:BDGE), Turning Point Brands, Inc. (NYSE:TPB), and The Meet Group, Inc. (NASDAQ:MEET). This group of stocks’ market valuations are closest to VSTM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FRPH | 7 | 33574 | -1 |
| BDGE | 7 | 60476 | -3 |
| TPB | 14 | 48228 | -2 |
| MEET | 21 | 96815 | 6 |
| Average | 12.25 | 59773 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $174 million in VSTM’s case. The Meet Group, Inc. (NASDAQ:MEET) is the most popular stock in this table. On the other hand FRP Holdings Inc (NASDAQ:FRPH) is the least popular one with only 7 bullish hedge fund positions. Verastem Inc (NASDAQ:VSTM) 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 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 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately VSTM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VSTM were disappointed as the stock returned -29.9% during the same time period 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.
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Disclosure: None. This article was originally published at Insider Monkey.
