Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 30 stock picks outperformed the S&P 500 Index by 4 percentage points through the middle of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Karyopharm Therapeutics Inc (NASDAQ:KPTI) has experienced an increase in activity from the world’s largest hedge funds in recent months. KPTI was in 18 hedge funds’ portfolios at the end of the third quarter of 2018. There were 14 hedge funds in our database with KPTI positions at the end of the previous quarter. Our calculations also showed that KPTI isn’t among the 30 most popular stocks among hedge funds.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the recent hedge fund action encompassing Karyopharm Therapeutics Inc (NASDAQ:KPTI).
What does the smart money think about Karyopharm Therapeutics Inc (NASDAQ:KPTI)?
At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the second quarter of 2018. On the other hand, there were a total of 9 hedge funds with a bullish position in KPTI at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Consonance Capital Management held the most valuable stake in Karyopharm Therapeutics Inc (NASDAQ:KPTI), which was worth $82.2 million at the end of the third quarter. On the second spot was Palo Alto Investors which amassed $79.4 million worth of shares. Moreover, Point72 Asset Management, Millennium Management, and Deerfield Management were also bullish on Karyopharm Therapeutics Inc (NASDAQ:KPTI), allocating a large percentage of their portfolios to this stock.
Consequently, some big names have jumped into Karyopharm Therapeutics Inc (NASDAQ:KPTI) headfirst. Deerfield Management, managed by James E. Flynn, initiated the most valuable position in Karyopharm Therapeutics Inc (NASDAQ:KPTI). Deerfield Management had $8.1 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $0.7 million position during the quarter. The following funds were also among the new KPTI investors: Dmitry Balyasny’s Balyasny Asset Management, Ken Griffin’s Citadel Investment Group, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s also examine hedge fund activity in other stocks similar to Karyopharm Therapeutics Inc (NASDAQ:KPTI). We will take a look at New Mountain Finance Corp. (NYSE:NMFC), Owens & Minor, Inc. (NYSE:OMI), The St. Joe Company (NYSE:JOE), and SunPower Corporation (NASDAQ:SPWR). This group of stocks’ market caps are similar to KPTI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NMFC | 12 | 20113 | 1 |
| OMI | 11 | 41574 | -2 |
| JOE | 15 | 512263 | 1 |
| SPWR | 10 | 39683 | 3 |
| Average | 12 | 153408 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $217 million in KPTI’s case. The St. Joe Company (NYSE:JOE) is the most popular stock in this table. On the other hand SunPower Corporation (NASDAQ:SPWR) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Karyopharm Therapeutics Inc (NASDAQ:KPTI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
