Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Enanta Pharmaceuticals Inc (NASDAQ:ENTA)? The smart money sentiment can provide an answer to this question.
Enanta Pharmaceuticals Inc (NASDAQ:ENTA) has experienced an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that ENTA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Roger Ibbotson of Zebra Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the recent hedge fund action surrounding Enanta Pharmaceuticals Inc (NASDAQ:ENTA).
What have hedge funds been doing with Enanta Pharmaceuticals Inc (NASDAQ:ENTA)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in ENTA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Farallon Capital has the largest position in Enanta Pharmaceuticals Inc (NASDAQ:ENTA), worth close to $108.1 million, corresponding to 0.9% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, founded by Jim Simons, which holds a $45.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism comprise Steven Boyd’s Armistice Capital, Noam Gottesman’s GLG Partners and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Armistice Capital allocated the biggest weight to Enanta Pharmaceuticals Inc (NASDAQ:ENTA), around 1.4% of its 13F portfolio. Farallon Capital is also relatively very bullish on the stock, dishing out 0.87 percent of its 13F equity portfolio to ENTA.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Weld Capital Management, managed by Minhua Zhang, initiated the largest position in Enanta Pharmaceuticals Inc (NASDAQ:ENTA). Weld Capital Management had $0.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.5 million investment in the stock during the quarter. The other funds with brand new ENTA positions are Benjamin A. Smith’s Laurion Capital Management, Roger Ibbotson’s Zebra Capital Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks similar to Enanta Pharmaceuticals Inc (NASDAQ:ENTA). These stocks are Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), Saul Centers Inc (NYSE:BFS), Range Resources Corp. (NYSE:RRC), and Brigham Minerals, Inc. (NYSE:MNRL). This group of stocks’ market valuations are similar to ENTA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNST | 27 | 584990 | 19 |
| BFS | 8 | 41810 | -5 |
| RRC | 29 | 334202 | 2 |
| MNRL | 23 | 140394 | 9 |
| Average | 21.75 | 275349 | 6.25 |
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 $275 million. That figure was $242 million in ENTA’s case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand Saul Centers Inc (NYSE:BFS) is the least popular one with only 8 bullish hedge fund positions. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately ENTA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ENTA investors were disappointed as the stock returned -23.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
