Insider Monkey has processed numerous 13F filings of hedge funds and successful value 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 fourth quarter. You can find articles 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 over the last 6 years and analyze what the smart money thinks of 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) based on that data.
Is FDMT a good stock to buy? Investors who are in the know were turning less bullish. The number of long hedge fund positions retreated by 6 lately. 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) was in 18 hedge funds’ portfolios at the end of March. The all time high for this statistic is 24. Our calculations also showed that FDMT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 24 hedge funds in our database with FDMT holdings at the end of December.
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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
Ole Andreas Halvorsen of Viking Global
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind we’re going to go over the new hedge fund action encompassing 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT).
Do Hedge Funds Think FDMT Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in FDMT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) was held by Viking Global, which reported holding $170.8 million worth of stock at the end of December. It was followed by Biotechnology Value Fund / BVF Inc with a $44.7 million position. Other investors bullish on the company included Casdin Capital, Perceptive Advisors, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Octagon Capital Advisors allocated the biggest weight to 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT), around 6.18% of its 13F portfolio. Aquilo Capital Management is also relatively very bullish on the stock, earmarking 2.36 percent of its 13F equity portfolio to FDMT.
Due to the fact that 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) has witnessed falling interest from hedge fund managers, logic holds that there is a sect of hedge funds who were dropping their entire stakes heading into Q2. It’s worth mentioning that OrbiMed Advisors cut the largest investment of all the hedgies followed by Insider Monkey, worth close to $5.2 million in stock. Farallon Capital, also sold off its stock, about $4.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 6 funds heading into Q2.
Let’s also examine hedge fund activity in other stocks similar to 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT). We will take a look at Vermilion Energy Inc (NYSE:VET), QAD Inc. (NASDAQ:QADA), The Chefs Warehouse, Inc (NASDAQ:CHEF), NextPoint Residential Trust Inc (NYSE:NXRT), MagnaChip Semiconductor Corporation (NYSE:MX), ChipMOS Technologies Inc (NASDAQ:IMOS), and Green Brick Partners Inc (NASDAQ:GRBK). This group of stocks’ market valuations resemble FDMT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VET | 10 | 25503 | 0 |
| QADA | 14 | 161878 | -1 |
| CHEF | 15 | 119611 | -1 |
| NXRT | 9 | 31370 | -1 |
| MX | 30 | 344567 | 2 |
| IMOS | 3 | 53312 | 1 |
| GRBK | 18 | 472309 | 6 |
| Average | 14.1 | 172650 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $398 million in FDMT’s case. MagnaChip Semiconductor Corporation (NYSE:MX) is the most popular stock in this table. On the other hand ChipMOS Technologies Inc (NASDAQ:IMOS) is the least popular one with only 3 bullish hedge fund positions. 4D Molecular Therapeutics, Inc. (NASDAQ:FDMT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FDMT is 49.3. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately FDMT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FDMT were disappointed as the stock returned -43.4% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow 4D Molecular Therapeutics Inc. (NASDAQ:FDMT)
Follow 4D Molecular Therapeutics Inc. (NASDAQ:FDMT)
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Disclosure: None. This article was originally published at Insider Monkey.
