Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Portola Pharmaceuticals Inc (NASDAQ:PTLA) from the perspective of those elite funds.
Portola Pharmaceuticals Inc (NASDAQ:PTLA) has experienced an increase in enthusiasm from smart money lately. Our calculations also showed that PTLA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Phill Gross of Adage Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the fresh hedge fund action encompassing Portola Pharmaceuticals Inc (NASDAQ:PTLA).
How have hedgies been trading Portola Pharmaceuticals Inc (NASDAQ:PTLA)?
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in PTLA over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Eric Bannasch’s Cadian Capital has the biggest position in Portola Pharmaceuticals Inc (NASDAQ:PTLA), worth close to $98.4 million, corresponding to 4.7% of its total 13F portfolio. The second most bullish fund manager is James Dondero of Highland Capital Management, with a $41 million position; 2.6% of its 13F portfolio is allocated to the stock. Other peers that hold long positions encompass Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Justin John Ferayorni’s Tamarack Capital Management and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to Portola Pharmaceuticals Inc (NASDAQ:PTLA), around 6.99% of its 13F portfolio. Cadian Capital is also relatively very bullish on the stock, setting aside 4.68 percent of its 13F equity portfolio to PTLA.
As industrywide interest jumped, some big names were breaking ground themselves. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, initiated the most valuable position in Portola Pharmaceuticals Inc (NASDAQ:PTLA). Polar Capital had $12.6 million invested in the company at the end of the quarter. Peter Kolchinsky’s RA Capital Management also made a $11.5 million investment in the stock during the quarter. The other funds with brand new PTLA positions are Louis Bacon’s Moore Global Investments, Joel Greenblatt’s Gotham Asset Management, and Renee Yao’s Neo Ivy Capital.
Let’s check out hedge fund activity in other stocks similar to Portola Pharmaceuticals Inc (NASDAQ:PTLA). We will take a look at Hope Bancorp, Inc. (NASDAQ:HOPE), Dril-Quip, Inc. (NYSE:DRQ), WillScot Corporation (NASDAQ:WSC), and Hostess Brands, Inc. (NASDAQ:TWNK). This group of stocks’ market values match PTLA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HOPE | 14 | 68754 | -1 |
| DRQ | 18 | 160339 | 0 |
| WSC | 24 | 213487 | 1 |
| TWNK | 31 | 291630 | 5 |
| Average | 21.75 | 183553 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $293 million in PTLA’s case. Hostess Brands, Inc. (NASDAQ:TWNK) is the most popular stock in this table. On the other hand Hope Bancorp, Inc. (NASDAQ:HOPE) is the least popular one with only 14 bullish hedge fund positions. Portola Pharmaceuticals Inc (NASDAQ:PTLA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on PTLA, though not to the same extent, as the stock returned 6.5% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
