Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Armata Pharmaceuticals, Inc. (NYSE:ARMP).
Is ARMP a good stock to buy? Investors who are in the know were taking a bullish view. The number of long hedge fund positions rose by 2 lately. Armata Pharmaceuticals, Inc. (NYSE:ARMP) was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 6. Our calculations also showed that ARMP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 take a look at the new hedge fund action regarding Armata Pharmaceuticals, Inc. (NYSE:ARMP).
Do Hedge Funds Think ARMP Is A Good Stock To Buy Now?
At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 200% from the previous quarter. By comparison, 1 hedge funds held shares or bullish call options in ARMP a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Armata Pharmaceuticals, Inc. (NYSE:ARMP), which was worth $0.6 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $0.1 million worth of shares. Millennium Management was 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 Renaissance Technologies allocated the biggest weight to Armata Pharmaceuticals, Inc. (NYSE:ARMP), around 0.0007% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, designating 0.0001 percent of its 13F equity portfolio to ARMP.
As industrywide interest jumped, key money managers have jumped into Armata Pharmaceuticals, Inc. (NYSE:ARMP) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in Armata Pharmaceuticals, Inc. (NYSE:ARMP). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.1 million position during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Armata Pharmaceuticals, Inc. (NYSE:ARMP) but similarly valued. We will take a look at JMP Group LLC (NYSE:JMP), Adams Resources & Energy Inc (NYSE:AE), Qumu Corp (NASDAQ:QUMU), Assertio Holdings Inc. (NASDAQ:ASRT), Performant Financial Corp (NASDAQ:PFMT), TDH Holdings, Inc. (NASDAQ:PETZ), and OFS Capital Corp (NASDAQ:OFS). This group of stocks’ market caps resemble ARMP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JMP | 1 | 1261 | -1 |
| AE | 4 | 10821 | 1 |
| QUMU | 6 | 21007 | 1 |
| ASRT | 6 | 7725 | -1 |
| PFMT | 7 | 39551 | 4 |
| PETZ | 2 | 484 | 1 |
| OFS | 3 | 451 | 1 |
| Average | 4.1 | 11614 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.1 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $1 million in ARMP’s case. Performant Financial Corp (NASDAQ:PFMT) is the most popular stock in this table. On the other hand JMP Group LLC (NYSE:JMP) is the least popular one with only 1 bullish hedge fund positions. Armata Pharmaceuticals, Inc. (NYSE:ARMP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ARMP is 38.7. 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 negative signal and 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately ARMP wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ARMP investors were disappointed as the stock returned -4% since the end of March (through 6/11) 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 most of these stocks already outperformed the market in 2021.
Disclosure: None. This article was originally published at Insider Monkey.