Is TPTX Stock A Buy or Sell?

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 900 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 Turning Point Therapeutics, Inc. (NASDAQ:TPTX).

Is TPTX stock a buy? Turning Point Therapeutics, Inc. (NASDAQ:TPTX) has experienced an increase in enthusiasm from smart money recently. Turning Point Therapeutics, Inc. (NASDAQ:TPTX) was in 27 hedge funds’ portfolios at the end of December. The all time high for this statistic is 30. There were 24 hedge funds in our database with TPTX holdings at the end of September. Our calculations also showed that TPTX 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. Hedge funds have more than $3 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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). So you can still find a lot of gems by following hedge funds’ moves today.

James E. Flynn of Deerfield Management

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 we’re going to take a gander at the recent hedge fund action encompassing Turning Point Therapeutics, Inc. (NASDAQ:TPTX).

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

At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in TPTX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, OrbiMed Advisors held the most valuable stake in Turning Point Therapeutics, Inc. (NASDAQ:TPTX), which was worth $334.5 million at the end of the fourth quarter. On the second spot was Cormorant Asset Management which amassed $291.5 million worth of shares. Alkeon Capital Management, Driehaus Capital, and Sectoral Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cormorant Asset Management allocated the biggest weight to Turning Point Therapeutics, Inc. (NASDAQ:TPTX), around 6.94% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, designating 6.73 percent of its 13F equity portfolio to TPTX.

As industrywide interest jumped, specific money managers have jumped into Turning Point Therapeutics, Inc. (NASDAQ:TPTX) headfirst. D E Shaw, managed by D. E. Shaw, initiated the most valuable position in Turning Point Therapeutics, Inc. (NASDAQ:TPTX). D E Shaw had $11.5 million invested in the company at the end of the quarter. James E. Flynn’s Deerfield Management also initiated a $10.2 million position during the quarter. The following funds were also among the new TPTX investors: Guy Levy’s Soleus Capital, Devesh Gandhi’s SilverArc Capital, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Turning Point Therapeutics, Inc. (NASDAQ:TPTX) but similarly valued. We will take a look at Parsley Energy Inc (NYSE:PE), Nikola Corporation (NASDAQ:NKLA), Herbalife Nutrition Ltd. (NYSE:HLF), The Timken Company (NYSE:TKR), MSA Safety Incorporated (NYSE:MSA), 1Life Healthcare, Inc. (NASDAQ:ONEM), and Life Storage, Inc. (NYSE:LSI). This group of stocks’ market values are similar to TPTX’s market value.

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As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $664 million. That figure was $877 million in TPTX’s case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand MSA Safety Incorporated (NYSE:MSA) is the least popular one with only 13 bullish hedge fund positions. Turning Point Therapeutics, Inc. (NASDAQ:TPTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TPTX is 60. 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 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 beat the market again by 0.9 percentage points. Unfortunately TPTX wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on TPTX were disappointed as the stock returned -40.4% 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 many of these stocks already outperformed the market since 2019.

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

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