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Is Enanta Pharmaceuticals Inc (ENTA) Going to Burn These Hedge Funds?

Abigail Fisher
·6 mins read

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Enanta Pharmaceuticals Inc (NASDAQ:ENTA) based on that data and determine whether they were really smart about the stock.

Enanta Pharmaceuticals Inc (NASDAQ:ENTA) was in 20 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 21. ENTA investors should be aware of an increase in hedge fund interest in recent months. There were 18 hedge funds in our database with ENTA positions at the end of the first quarter. Our calculations also showed that ENTA isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ian Wace Marshall Wace
Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. With all of this in mind let's take a gander at the latest hedge fund action surrounding Enanta Pharmaceuticals Inc (NASDAQ:ENTA).

How are hedge funds trading Enanta Pharmaceuticals Inc (NASDAQ:ENTA)?

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in ENTA a year ago. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Enanta Pharmaceuticals Inc (NASDAQ:ENTA) was held by Farallon Capital, which reported holding $87.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $47.3 million position. Other investors bullish on the company included Armistice Capital, GLG Partners, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Farallon Capital allocated the biggest weight to Enanta Pharmaceuticals Inc (NASDAQ:ENTA), around 0.72% of its 13F portfolio. Armistice Capital is also relatively very bullish on the stock, dishing out 0.71 percent of its 13F equity portfolio to ENTA.

Consequently, key money managers have been driving this bullishness. PDT Partners, managed by Peter Muller, created the biggest position in Enanta Pharmaceuticals Inc (NASDAQ:ENTA). PDT Partners had $1.5 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $0.7 million position during the quarter. The following funds were also among the new ENTA investors: Paul Tudor Jones's Tudor Investment Corp, Benjamin A. Smith's Laurion Capital Management, and Sander Gerber's Hudson Bay Capital Management.

Let's now review hedge fund activity in other stocks similar to Enanta Pharmaceuticals Inc (NASDAQ:ENTA). These stocks are Encore Wire Corporation (NASDAQ:WIRE), BrightSphere Investment Group Inc (NYSE:BSIG), Lindsay Corporation (NYSE:LNN), Avidity Biosciences, Inc. (NASDAQ:RNA), Meridian Bioscience, Inc. (NASDAQ:VIVO), United Natural Foods, Inc. (NYSE:UNFI), and SilverCrest Metals Inc. (NYSE:SILV). This group of stocks' market caps match ENTA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WIRE,20,40069,6 BSIG,22,345683,2 LNN,11,158723,0 RNA,24,334500,24 VIVO,23,173955,3 UNFI,21,62895,3 SILV,9,104921,0 Average,18.6,174392,5.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $189 million in ENTA's case. Avidity Biosciences, Inc. (NASDAQ:RNA) is the most popular stock in this table. On the other hand SilverCrest Metals Inc. (NYSE:SILV) is the least popular one with only 9 bullish hedge fund positions. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ENTA is 35.6. 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 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately ENTA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ENTA were disappointed as the stock returned -8.8% in Q3 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 many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.

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