Is PTCT Stock A Buy or Sell?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards PTC Therapeutics, Inc. (NASDAQ:PTCT) to find out whether there were any major changes in hedge funds’ views.

Is PTCT stock a buy? PTC Therapeutics, Inc. (NASDAQ:PTCT) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 36. PTCT has seen a decrease in enthusiasm from smart money in recent months. There were 25 hedge funds in our database with PTCT holdings at the end of September. Our calculations also showed that PTCT isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 124 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.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 let’s take a glance at the recent hedge fund action regarding PTC Therapeutics, Inc. (NASDAQ:PTCT).

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

At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PTCT over the last 22 quarters. 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 PTC Therapeutics, Inc. (NASDAQ:PTCT) was held by D E Shaw, which reported holding $59.4 million worth of stock at the end of December. It was followed by Point72 Asset Management with a $57.8 million position. Other investors bullish on the company included Armistice Capital, Sectoral Asset Management, and Polar Capital. In terms of the portfolio weights assigned to each position Burrage Capital Management allocated the biggest weight to PTC Therapeutics, Inc. (NASDAQ:PTCT), around 7.49% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, earmarking 2.6 percent of its 13F equity portfolio to PTCT.

Judging by the fact that PTC Therapeutics, Inc. (NASDAQ:PTCT) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there exists a select few funds who sold off their full holdings heading into Q1. Intriguingly, Ken Griffin’s Citadel Investment Group cut the biggest stake of the 750 funds tracked by Insider Monkey, totaling about $3.4 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $1.4 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds heading into Q1.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PTC Therapeutics, Inc. (NASDAQ:PTCT) but similarly valued. We will take a look at LivePerson, Inc. (NASDAQ:LPSN), Novanta Inc. (NASDAQ:NOVT), JBG SMITH Properties (NYSE:JBGS), New Residential Investment Corp (NYSE:NRZ), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), Vivint Smart Home, Inc. (NYSE:VVNT), and Highwoods Properties Inc (NYSE:HIW). All of these stocks’ market caps are closest to PTCT’s market cap.

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As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $280 million. That figure was $261 million in PTCT’s case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand Vivint Smart Home, Inc. (NYSE:VVNT) is the least popular one with only 9 bullish hedge fund positions. PTC Therapeutics, Inc. (NASDAQ:PTCT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PTCT is 44. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately PTCT wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); PTCT investors were disappointed as the stock returned -22.1% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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