Is DCPH Stock A Buy or Sell?
Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH).
Is DCPH stock a buy? The smart money was becoming hopeful. The number of bullish hedge fund positions improved by 6 lately. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) was in 36 hedge funds' portfolios at the end of December. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DCPH isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 30 hedge funds in our database with DCPH positions at the end of the third quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
James E. Flynn of Deerfield Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Now we're going to check out the new hedge fund action surrounding Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH).
Do Hedge Funds Think DCPH Is A Good Stock To Buy Now?
At Q4's end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in DCPH a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Redmile Group held the most valuable stake in Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), which was worth $253.3 million at the end of the fourth quarter. On the second spot was Avoro Capital Advisors (venBio Select Advisor) which amassed $74.2 million worth of shares. OrbiMed Advisors, Alkeon Capital Management, and Deerfield Management 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 Redmile Group allocated the biggest weight to Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), around 3.07% of its 13F portfolio. Consonance Capital Management is also relatively very bullish on the stock, dishing out 2.58 percent of its 13F equity portfolio to DCPH.
Now, specific money managers were breaking ground themselves. Consonance Capital Management, managed by Mitchell Blutt, initiated the most outsized position in Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH). Consonance Capital Management had $27.7 million invested in the company at the end of the quarter. Arthur B Cohen and Joseph Healey's Healthcor Management LP also initiated a $7.9 million position during the quarter. The other funds with new positions in the stock are Henrik Rhenman's Rhenman & Partners Asset Management, Devesh Gandhi's SilverArc Capital, and Michael Rockefeller and Karl Kroeker's Woodline Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) but similarly valued. We will take a look at AllianceBernstein Holding LP (NYSE:AB), Brighthouse Financial, Inc. (NASDAQ:BHF), Ambarella Inc (NASDAQ:AMBA), ALLETE Inc (NYSE:ALE), LivaNova PLC (NASDAQ:LIVN), Home Bancshares Inc (NASDAQ:HOMB), and Univar Solutions Inc (NYSE:UNVR). All of these stocks' market caps match DCPH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AB,9,39879,1 BHF,33,464270,7 AMBA,36,377357,2 ALE,11,90048,-9 LIVN,30,547350,4 HOMB,12,37950,-2 UNVR,31,712512,1 Average,23.1,324195,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $673 million in DCPH's case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 9 bullish hedge fund positions. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DCPH is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and beat the market again by 0.4 percentage points. Unfortunately DCPH wasn't nearly as popular as these 30 stocks and hedge funds that were betting on DCPH were disappointed as the stock returned -19.3% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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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