Puma Biotechnology Inc (PBYI): Are Hedge Funds Right About This Stock?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Puma Biotechnology Inc (NYSE:PBYI) changed recently.

Puma Biotechnology Inc (NYSE:PBYI) investors should be aware of an increase in support from the world’s most elite money managers in recent months. Puma Biotechnology Inc (NYSE:PBYI) was in 16 hedge funds’ portfolios at the end of March. The all time high for this statistic is 29. Our calculations also showed that PBYI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Now let’s take a look at the new hedge fund action surrounding Puma Biotechnology Inc (NYSE:PBYI).

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

Heading into the second quarter of 2021, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in PBYI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Deerfield Management held the most valuable stake in Puma Biotechnology Inc (NYSE:PBYI), which was worth $36.6 million at the end of the fourth quarter. On the second spot was Camber Capital Management which amassed $24.8 million worth of shares. Renaissance Technologies, Palo Alto Investors, and Great Point Partners 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 Great Point Partners allocated the biggest weight to Puma Biotechnology Inc (NYSE:PBYI), around 2.61% of its 13F portfolio. AIGH Investment Partners is also relatively very bullish on the stock, dishing out 1.97 percent of its 13F equity portfolio to PBYI.

As one would reasonably expect, specific money managers were leading the bulls’ herd. AIGH Investment Partners, managed by Orin Hirschman, initiated the most outsized position in Puma Biotechnology Inc (NYSE:PBYI). AIGH Investment Partners had $9.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.6 million investment in the stock during the quarter. The only other fund with a brand new PBYI position is Roger Ibbotson’s Zebra Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Puma Biotechnology Inc (NYSE:PBYI) but similarly valued. These stocks are Outlook Therapeutics, Inc. (NASDAQ:OTLK), Alta Equipment Group Inc. (NYSE:ALTG), Enterprise Bancorp, Inc (NASDAQ:EBTC), CHP Merger Corp. (NASDAQ:CHPMU), Ellomay Capital Ltd. (NYSE:ELLO), Falcon Minerals Corporation (NASDAQ:FLMN), and NewAge Inc (NASDAQ:NBEV). All of these stocks’ market caps are closest to PBYI’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.4 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $126 million in PBYI’s case. Falcon Minerals Corporation (NASDAQ:FLMN) is the most popular stock in this table. On the other hand Ellomay Capital Ltd. (NYSE:ELLO) is the least popular one with only 1 bullish hedge fund positions. Puma Biotechnology Inc (NYSE:PBYI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PBYI is 60.1. 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 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 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately PBYI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PBYI were disappointed as the stock returned -20.3% since the end of March (through 7/23) 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 many of these stocks already outperformed the market since 2019.

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

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