Insider Monkey has processed numerous 13F filings of hedge funds and successful investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find write-ups about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of ObsEva SA (NASDAQ:OBSV) based on that data.
Hedge fund interest in ObsEva SA (NASDAQ:OBSV) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare OBSV to other stocks including First Mid Bancshares, Inc. (NASDAQ:FMBH), Grupo Supervielle S.A. (NYSE:SUPV), and TORM plc (NASDAQ:TRMD) to get a better sense of its popularity.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a glance at the latest hedge fund action encompassing ObsEva SA (NASDAQ:OBSV).
What does smart money think about ObsEva SA (NASDAQ:OBSV)?
Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2018. On the other hand, there were a total of 6 hedge funds with a bullish position in OBSV a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, OrbiMed Advisors was the largest shareholder of ObsEva SA (NASDAQ:OBSV), with a stake worth $33.3 million reported as of the end of March. Trailing OrbiMed Advisors was Rock Springs Capital Management, which amassed a stake valued at $14.3 million. Vivo Capital, Sectoral Asset Management, and Point72 Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as ObsEva SA (NASDAQ:OBSV) but similarly valued. These stocks are First Mid Bancshares, Inc. (NASDAQ:FMBH), Grupo Supervielle S.A. (NYSE:SUPV), TORM plc (NASDAQ:TRMD), and Textainer Group Holdings Limited (NYSE:TGH). This group of stocks’ market values are similar to OBSV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FMBH | 3 | 8537 | -1 |
| SUPV | 12 | 32899 | 2 |
| TRMD | 4 | 388338 | 1 |
| TGH | 10 | 20500 | 3 |
| Average | 7.25 | 112569 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $76 million in OBSV’s case. Grupo Supervielle S.A. (NYSE:SUPV) is the most popular stock in this table. On the other hand First Mid Bancshares, Inc. (NASDAQ:FMBH) is the least popular one with only 3 bullish hedge fund positions. ObsEva SA (NASDAQ:OBSV) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately OBSV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OBSV were disappointed as the stock returned -15.8% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
