We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX) based on that data.
Is FMTX a good stock to buy now? Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX) has seen a decrease in support from the world's most elite money managers lately. Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX) was in 10 hedge funds' portfolios at the end of September. The all time high for this statistics is 11. Our calculations also showed that FMTX isn't among the 30 most popular stocks among hedge funds (click for Q3 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Peter Kolchinsky of RA Capital Management
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let's check out the fresh hedge fund action encompassing Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX).
Do Hedge Funds Think FMTX Is A Good Stock To Buy Now?
At Q3's end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in FMTX a year ago. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX) was held by RA Capital Management, which reported holding $449.1 million worth of stock at the end of September. It was followed by Cormorant Asset Management with a $166.5 million position. Other investors bullish on the company included Baker Bros. Advisors, Samsara BioCapital, and Perceptive Advisors. In terms of the portfolio weights assigned to each position Samsara BioCapital allocated the biggest weight to Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX), around 20.74% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, setting aside 8.22 percent of its 13F equity portfolio to FMTX.
Seeing as Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX) has witnessed bearish sentiment from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of fund managers that elected to cut their entire stakes in the third quarter. At the top of the heap, Israel Englander's Millennium Management dumped the biggest investment of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $14.6 million in stock, and Jerome Pfund and Michael Sjostrom's Sectoral Asset Management was right behind this move, as the fund dropped about $11 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX). We will take a look at Weingarten Realty Investors (NYSE:WRI), Kirby Corporation (NYSE:KEX), Alcoa Corporation (NYSE:AA), Utz Brands Inc (NYSE:UTZ), Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY), Federated Hermes, Inc. (NYSE:FHI), and Guangshen Railway Co. Ltd (NYSE:GSH). All of these stocks' market caps resemble FMTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WRI,14,121078,-5 KEX,34,423901,14 AA,33,415610,0 UTZ,15,166197,-4 HRMY,10,214625,10 FHI,29,167641,-1 GSH,1,95,0 Average,19.4,215592,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $927 million in FMTX's case. Kirby Corporation (NYSE:KEX) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 bullish hedge fund positions. Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FMTX is 44.9. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately FMTX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FMTX investors were disappointed as the stock returned 1.2% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.