Is Editas Medicine, Inc. (NASDAQ:EDIT) 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, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Is Editas Medicine, Inc. (NASDAQ:EDIT) ready to rally soon? Hedge funds are betting on the stock. The number of bullish hedge fund bets inched up by 1 in recent months. Our calculations also showed that edit isn’t among the 30 most popular stocks among hedge funds. EDIT was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 17 hedge funds in our database with EDIT positions at the end of the previous quarter.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a peek at the key hedge fund action regarding Editas Medicine, Inc. (NASDAQ:EDIT).
How are hedge funds trading Editas Medicine, Inc. (NASDAQ:EDIT)?
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EDIT over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Deerfield Management held the most valuable stake in Editas Medicine, Inc. (NASDAQ:EDIT), which was worth $26.4 million at the end of the fourth quarter. On the second spot was Viking Global which amassed $21.2 million worth of shares. Moreover, Casdin Capital, D E Shaw, and Valiant Capital were also bullish on Editas Medicine, Inc. (NASDAQ:EDIT), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, established the biggest position in Editas Medicine, Inc. (NASDAQ:EDIT). Millennium Management had $1.7 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $0.9 million position during the quarter. The other funds with brand new EDIT positions are Dmitry Balyasny’s Balyasny Asset Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s check out hedge fund activity in other stocks similar to Editas Medicine, Inc. (NASDAQ:EDIT). These stocks are Casa Systems, Inc. (NASDAQ:CASA), Standard Motor Products, Inc. (NYSE:SMP), PPDAI Group Inc. (NYSE:PPDF), and Tortoise Energy Infrastructure Corporation (NYSE:TYG). This group of stocks’ market valuations resemble EDIT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CASA | 12 | 28507 | 2 |
| SMP | 11 | 128746 | 1 |
| PPDF | 6 | 4982 | 1 |
| TYG | 3 | 2890 | 0 |
| Average | 8 | 41281 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $105 million in EDIT’s case. Casa Systems, Inc. (NASDAQ:CASA) is the most popular stock in this table. On the other hand Tortoise Energy Infrastructure Corporation (NYSE:TYG) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Editas Medicine, Inc. (NASDAQ:EDIT) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately EDIT wasn’t nearly as popular as these 15 stock and hedge funds that were betting on EDIT were disappointed as the stock returned 15.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
