Is Twist Bioscience Corporation (TWST) A Good Stock To Buy?

We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of Twist Bioscience Corporation (NASDAQ:TWST) based on that data.

Is TWST a good stock to buy? Twist Bioscience Corporation (NASDAQ:TWST) has seen a decrease in hedge fund sentiment recently. Twist Bioscience Corporation (NASDAQ:TWST) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistic is 24. Our calculations also showed that TWST isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Dondero of Highland Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a glance at the new hedge fund action regarding Twist Bioscience Corporation (NASDAQ:TWST).

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

At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TWST over the last 24 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, ARK Investment Management held the most valuable stake in Twist Bioscience Corporation (NASDAQ:TWST), which was worth $673.6 million at the end of the second quarter. On the second spot was Marshall Wace LLP which amassed $134.8 million worth of shares. Casdin Capital, Tao Capital, and D E Shaw 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 Tao Capital allocated the biggest weight to Twist Bioscience Corporation (NASDAQ:TWST), around 25.34% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, setting aside 3.38 percent of its 13F equity portfolio to TWST.

Due to the fact that Twist Bioscience Corporation (NASDAQ:TWST) has faced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of funds who were dropping their entire stakes heading into Q3. Interestingly, Richard Driehaus’s Driehaus Capital dropped the largest stake of the 750 funds monitored by Insider Monkey, totaling an estimated $14.7 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dropped about $0.8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Twist Bioscience Corporation (NASDAQ:TWST) but similarly valued. These stocks are Performance Food Group Company (NYSE:PFGC), MSA Safety Incorporated (NYSE:MSA), Coherent, Inc. (NASDAQ:COHR), Manpowergroup Inc (NYSE:MAN), MicroStrategy Incorporated (NASDAQ:MSTR), United States Steel Corporation (NYSE:X), and C3.ai, Inc. (NYSE:AI). This group of stocks’ market caps are closest to TWST’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $525 million. That figure was $1157 million in TWST’s case. Coherent, Inc. (NASDAQ:COHR) 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. Twist Bioscience Corporation (NASDAQ:TWST) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TWST is 49.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately TWST wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TWST investors were disappointed as the stock returned -11.9% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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