Is MTEM A Good Stock To Buy Now According To Hedge Funds?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Molecular Templates, Inc. (NASDAQ:MTEM) in this article.

Is MTEM a good stock to buy now? The smart money was getting less bullish. The number of bullish hedge fund bets were trimmed by 1 in recent months. Molecular Templates, Inc. (NASDAQ:MTEM) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 23. Our calculations also showed that MTEM 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). There were 23 hedge funds in our database with MTEM positions at the end of the second quarter.

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.

Andre Perold of HighVista Strategies

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. With all of this in mind let’s check out the recent hedge fund action regarding Molecular Templates, Inc. (NASDAQ:MTEM).

Do Hedge Funds Think MTEM Is A Good Stock To Buy Now?

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in MTEM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Molecular Templates, Inc. (NASDAQ:MTEM) was held by Perceptive Advisors, which reported holding $27 million worth of stock at the end of September. It was followed by Biotechnology Value Fund / BVF Inc with a $23.5 million position. Other investors bullish on the company included Consonance Capital Management, Woodline Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Molecular Templates, Inc. (NASDAQ:MTEM), around 2.31% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, earmarking 1.37 percent of its 13F equity portfolio to MTEM.

Since Molecular Templates, Inc. (NASDAQ:MTEM) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedge funds that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Jeffrey Jay and David Kroin’s Great Point Partners said goodbye to the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $18.6 million in stock, and Brian Ashford-Russell and Tim Woolley’s Polar Capital was right behind this move, as the fund sold off about $7 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Molecular Templates, Inc. (NASDAQ:MTEM) but similarly valued. We will take a look at Endeavour Silver Corp. (NYSE:EXK), Harmonic Inc (NASDAQ:HLIT), Oyster Point Pharma, Inc. (NASDAQ:OYST), Forte Biosciences, Inc. (NASDAQ:FBRX), Cars.com, LLC (NYSE:CARS), MSG Networks Inc (NYSE:MSGN), and Meridian Bancorp, Inc. (NASDAQ:EBSB). All of these stocks’ market caps resemble MTEM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $116 million in MTEM’s case. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand Forte Biosciences, Inc. (NASDAQ:FBRX) is the least popular one with only 6 bullish hedge fund positions. Molecular Templates, Inc. (NASDAQ:MTEM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTEM is 72.7. 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 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 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately MTEM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MTEM were disappointed as the stock returned -6% since the end of September (through 12/14) 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.

Disclosure: None. This article was originally published at Insider Monkey.