Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Kala Pharmaceuticals, Inc. (NASDAQ:KALA).
Kala Pharmaceuticals, Inc. (NASDAQ:KALA) investors should pay attention to an increase in hedge fund interest lately. Kala Pharmaceuticals, Inc. (NASDAQ:KALA) was in 16 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 19. There were 15 hedge funds in our database with KALA holdings at the end of December. Our calculations also showed that KALA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was 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). So you can still find a lot of gems by following hedge funds’ moves today.
Daniel Och, Founder of OZ Management
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. With all of this in mind let’s check out the latest hedge fund action surrounding Kala Pharmaceuticals, Inc. (NASDAQ:KALA).
Do Hedge Funds Think KALA 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 the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in KALA over the last 23 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, RA Capital Management was the largest shareholder of Kala Pharmaceuticals, Inc. (NASDAQ:KALA), with a stake worth $73.3 million reported as of the end of March. Trailing RA Capital Management was OrbiMed Advisors, which amassed a stake valued at $36.8 million. Vivo Capital, Millennium Management, and Samsara BioCapital 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 RA Capital Management allocated the biggest weight to Kala Pharmaceuticals, Inc. (NASDAQ:KALA), around 1.11% of its 13F portfolio. Samsara BioCapital is also relatively very bullish on the stock, designating 0.75 percent of its 13F equity portfolio to KALA.
As aggregate interest increased, specific money managers have jumped into Kala Pharmaceuticals, Inc. (NASDAQ:KALA) headfirst. OZ Management, managed by Daniel S. Och, created the most valuable position in Kala Pharmaceuticals, Inc. (NASDAQ:KALA). OZ Management had $0.3 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $0.3 million position during the quarter. The other funds with brand new KALA positions are The Motley Fool’s 1623 Capital, Peter Algert’s Algert Global, and Greg Eisner’s Engineers Gate Manager.
Let’s also examine hedge fund activity in other stocks similar to Kala Pharmaceuticals, Inc. (NASDAQ:KALA). These stocks are InfuSystem Holdings, Inc. (NYSE:INFU), Motorsport Games Inc. (NASDAQ:MSGM), Luokung Technology Corp (NASDAQ:LKCO), Hersha Hospitality Trust (NYSE:HT), Turtle Beach Corp (NASDAQ:HEAR), Clearfield, Inc. (NASDAQ:CLFD), and Whitestone REIT (NYSE:WSR). This group of stocks’ market caps resemble KALA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INFU | 11 | 41418 | -3 |
| MSGM | 6 | 13825 | 6 |
| LKCO | 1 | 118 | -1 |
| HT | 12 | 16864 | -2 |
| HEAR | 20 | 68274 | 6 |
| CLFD | 7 | 33133 | -1 |
| WSR | 7 | 12971 | -3 |
| Average | 9.1 | 26658 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.1 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $130 million in KALA’s case. Turtle Beach Corp (NASDAQ:HEAR) is the most popular stock in this table. On the other hand Luokung Technology Corp (NASDAQ:LKCO) is the least popular one with only 1 bullish hedge fund positions. Kala Pharmaceuticals, Inc. (NASDAQ:KALA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KALA is 70.7. 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 KALA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KALA were disappointed as the stock returned -46.4% 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.
Follow Kala Bio Inc. (NASDAQ:KALA)
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Disclosure: None. This article was originally published at Insider Monkey.
