At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). 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 Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) a great stock to buy now? Prominent investors were becoming hopeful. The number of bullish hedge fund bets inched up by 3 in recent months. Our calculations also showed that MNTA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_735677" align="aligncenter" width="400"] Sander Gerber of Hudson Bay Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we're going to analyze the fresh hedge fund action encompassing Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA).
What does smart money think about Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)?
At the end of the first quarter, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the fourth quarter of 2019. By comparison, 18 hedge funds held shares or bullish call options in MNTA 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.
According to Insider Monkey's hedge fund database, Redmile Group, managed by Jeremy Green, holds the number one position in Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). Redmile Group has a $140.8 million position in the stock, comprising 3.9% of its 13F portfolio. The second largest stake is held by RA Capital Management, managed by Peter Kolchinsky, which holds a $68.9 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Lee Ainslie's Maverick Capital, Phill Gross and Robert Atchinson's Adage Capital Management and Stephen DuBois's Camber Capital Management. In terms of the portfolio weights assigned to each position Redmile Group allocated the biggest weight to Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), around 3.95% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, setting aside 3.48 percent of its 13F equity portfolio to MNTA.
As industrywide interest jumped, specific money managers were breaking ground themselves. Maverick Capital, managed by Lee Ainslie, initiated the most valuable position in Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). Maverick Capital had $59.1 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson's Adage Capital Management also made a $57.7 million investment in the stock during the quarter. The other funds with brand new MNTA positions are Israel Englander's Millennium Management, Greg Martinez's Parkman Healthcare Partners, and Kamran Moghtaderi's Eversept Partners.
Let's now take a look at hedge fund activity in other stocks similar to Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). We will take a look at Manhattan Associates, Inc. (NASDAQ:MANH), LG Display Co Ltd. (NYSE:LPL), Nevro Corp (NYSE:NVRO), and B2Gold Corp (NYSE:BTG). This group of stocks' market values match MNTA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MANH,20,199741,-4 LPL,4,4761,1 NVRO,31,694464,-2 BTG,19,228596,2 Average,18.5,281891,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $667 million in MNTA's case. Nevro Corp (NYSE:NVRO) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is more popular among hedge funds. 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on MNTA, though not to the same extent, as the stock returned 22.3% in Q2 and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.