We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like MacroGenics Inc (NASDAQ:MGNX).
Is MacroGenics Inc (NASDAQ:MGNX) going to take off soon? Hedge funds are turning less bullish. The number of long hedge fund positions were trimmed by 4 lately. Our calculations also showed that MGNX isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action encompassing MacroGenics Inc (NASDAQ:MGNX).
What have hedge funds been doing with MacroGenics Inc (NASDAQ:MGNX)?
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in MGNX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of MacroGenics Inc (NASDAQ:MGNX), with a stake worth $50 million reported as of the end of March. Trailing Millennium Management was GMT Capital, which amassed a stake valued at $17.8 million. 683 Capital Partners, Point72 Asset Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that MacroGenics Inc (NASDAQ:MGNX) has faced bearish sentiment from the smart money, it’s easy to see that there was a specific group of funds who sold off their full holdings in the second quarter. Interestingly, Julian Baker and Felix Baker’s Baker Bros. Advisors dumped the largest position of the 750 funds tracked by Insider Monkey, comprising close to $5.4 million in stock, and David Rosen’s Rubric Capital Management was right behind this move, as the fund cut about $5.1 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds in the second quarter.
Let’s go over hedge fund activity in other stocks similar to MacroGenics Inc (NASDAQ:MGNX). These stocks are Malibu Boats Inc (NASDAQ:MBUU), Franklin Street Properties Corp. (NYSE:FSP), Stock Yards Bancorp, Inc. (NASDAQ:SYBT), and German American Bancorp., Inc. (NASDAQ:GABC). All of these stocks’ market caps match MGNX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MBUU | 17 | 103028 | -1 |
| FSP | 6 | 33455 | -2 |
| SYBT | 6 | 13083 | -1 |
| GABC | 7 | 18041 | 1 |
| Average | 9 | 41902 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $115 million in MGNX’s case. Malibu Boats Inc (NASDAQ:MBUU) is the most popular stock in this table. On the other hand Franklin Street Properties Corp. (NYSE:FSP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks MacroGenics Inc (NASDAQ:MGNX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MGNX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MGNX were disappointed as the stock returned -24.8% during the third quarter 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
