Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Minerva Neurosciences, Inc (NASDAQ:NERV).
Is Minerva Neurosciences, Inc (NASDAQ:NERV) a safe investment now? Hedge funds are buying. The number of long hedge fund bets moved up by 1 recently. Our calculations also showed that NERV isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most market participants, hedge funds are assumed to be slow, old financial tools of yesteryear. While there are over 8000 funds trading today, We choose to focus on the elite of this group, around 750 funds. It is estimated that this group of investors handle most of the hedge fund industry’s total asset base, and by watching their matchless stock picks, Insider Monkey has revealed various investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
James Dondero of Highland Capital Management
We’re going to view the fresh hedge fund action regarding Minerva Neurosciences, Inc (NASDAQ:NERV).
What does smart money think about Minerva Neurosciences, Inc (NASDAQ:NERV)?
At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NERV over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GMT Capital held the most valuable stake in Minerva Neurosciences, Inc (NASDAQ:NERV), which was worth $7.8 million at the end of the first quarter. On the second spot was Millennium Management which amassed $7.3 million worth of shares. Moreover, Highland Capital Management, Cormorant Asset Management, and Renaissance Technologies were also bullish on Minerva Neurosciences, Inc (NASDAQ:NERV), allocating a large percentage of their portfolios to this stock.
Now, specific money managers were leading the bulls’ herd. GMT Capital, managed by Thomas E. Claugus, created the most valuable position in Minerva Neurosciences, Inc (NASDAQ:NERV). GMT Capital had $7.8 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.1 million position during the quarter.
Let’s check out hedge fund activity in other stocks similar to Minerva Neurosciences, Inc (NASDAQ:NERV). We will take a look at Arlo Technologies, Inc. (NYSE:ARLO), Phoenix New Media Ltd (NYSE:FENG), American National BankShares Inc (NASDAQ:AMNB), and Urovant Sciences Ltd. (NASDAQ:UROV). This group of stocks’ market values match NERV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARLO | 12 | 26452 | 4 |
| FENG | 9 | 33399 | 0 |
| AMNB | 2 | 7542 | -1 |
| UROV | 9 | 37464 | -3 |
| Average | 8 | 26214 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $34 million in NERV’s case. Arlo Technologies, Inc. (NYSE:ARLO) is the most popular stock in this table. On the other hand American National BankShares Inc (NASDAQ:AMNB) is the least popular one with only 2 bullish hedge fund positions. Minerva Neurosciences, Inc (NASDAQ:NERV) 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 NERV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NERV were disappointed as the stock returned -43% 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.
