Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Jounce Therapeutics, Inc. (NASDAQ:JNCE).
Is JNCE a good stock to buy now? Hedge fund interest in Jounce Therapeutics, Inc. (NASDAQ:JNCE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that JNCE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare JNCE to other stocks including Mesabi Trust (NYSE:MSB), VYNE Therapeutics Inc. (NASDAQ:VYNE), and Diamond S Shipping Inc. (NYSE:DSSI) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Robert Atchinson of Adage Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we’re going to take a look at the fresh hedge fund action encompassing Jounce Therapeutics, Inc. (NASDAQ:JNCE).
Do Hedge Funds Think JNCE Is A Good Stock To Buy Now?
At the end of September, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in JNCE over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Jounce Therapeutics, Inc. (NASDAQ:JNCE) was held by Woodline Partners, which reported holding $7.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $2.4 million position. Other investors bullish on the company included AQR Capital Management, Adage Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Woodline Partners allocated the biggest weight to Jounce Therapeutics, Inc. (NASDAQ:JNCE), around 0.25% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to JNCE.
Since Jounce Therapeutics, Inc. (NASDAQ:JNCE) has experienced declining sentiment from hedge fund managers, we can see that there was a specific group of fund managers that decided to sell off their entire stakes last quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest investment of the 750 funds followed by Insider Monkey, comprising an estimated $0.6 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Jounce Therapeutics, Inc. (NASDAQ:JNCE). These stocks are Mesabi Trust (NYSE:MSB), VYNE Therapeutics Inc. (NASDAQ:VYNE), Diamond S Shipping Inc. (NYSE:DSSI), EZCORP Inc (NASDAQ:EZPW), Surface Oncology, Inc. (NASDAQ:SURF), Clearfield, Inc. (NASDAQ:CLFD), and Independent Bank Corporation (NASDAQ:IBCP). All of these stocks’ market caps match JNCE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MSB | 5 | 37474 | 0 |
| VYNE | 10 | 54821 | -4 |
| DSSI | 15 | 19678 | -1 |
| EZPW | 15 | 56333 | 0 |
| SURF | 13 | 56704 | 2 |
| CLFD | 3 | 13830 | -1 |
| IBCP | 13 | 24898 | -1 |
| Average | 10.6 | 37677 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $14 million in JNCE’s case. Diamond S Shipping Inc. (NYSE:DSSI) is the most popular stock in this table. On the other hand Clearfield, Inc. (NASDAQ:CLFD) is the least popular one with only 3 bullish hedge fund positions. Jounce Therapeutics, Inc. (NASDAQ:JNCE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JNCE is 65. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately JNCE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on JNCE were disappointed as the stock returned -14.7% since the end of September (through 12/8) 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 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.
