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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Forte Biosciences, Inc. (NASDAQ:FBRX).
Is Forte Biosciences (FBRX) a good stock to buy now? FBRX was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 2. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. FBRX investors should pay attention to an increase in hedge fund sentiment of late. There were 2 hedge funds in our database with FBRX holdings at the end of June. Our calculations also showed that FBRX 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ken Griffin of Citadel Investment Group
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 we're going to take a look at the key hedge fund action encompassing Forte Biosciences, Inc. (NASDAQ:FBRX).
How have hedgies been trading Forte Biosciences, Inc. (NASDAQ:FBRX)?
At the end of September, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 200% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in FBRX over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Biotechnology Value Fund / BVF Inc was the largest shareholder of Forte Biosciences, Inc. (NASDAQ:FBRX), with a stake worth $37.7 million reported as of the end of September. Trailing Biotechnology Value Fund / BVF Inc was Citadel Investment Group, which amassed a stake valued at $16.5 million. OrbiMed Advisors, Parkman Healthcare Partners, and Renaissance Technologies 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 Biotechnology Value Fund / BVF Inc allocated the biggest weight to Forte Biosciences, Inc. (NASDAQ:FBRX), around 2.05% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, designating 0.21 percent of its 13F equity portfolio to FBRX.
Consequently, key money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the biggest position in Forte Biosciences, Inc. (NASDAQ:FBRX). Citadel Investment Group had $16.5 million invested in the company at the end of the quarter. Greg Martinez's Parkman Healthcare Partners also initiated a $0.6 million position during the quarter. The following funds were also among the new FBRX investors: Renaissance Technologies and Parvinder Thiara's Athanor Capital.
Let's also examine hedge fund activity in other stocks similar to Forte Biosciences, Inc. (NASDAQ:FBRX). We will take a look at Cars.com, LLC (NYSE:CARS), MSG Networks Inc (NYSE:MSGN), Meridian Bancorp, Inc. (NASDAQ:EBSB), Freeline Therapeutics Holdings plc (NASDAQ:FRLN), Capstead Mortgage Corporation (NYSE:CMO), Geron Corporation (NASDAQ:GERN), and Assembly Biosciences Inc (NASDAQ:ASMB). All of these stocks' market caps are closest to FBRX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CARS,22,133586,1 MSGN,26,189325,1 EBSB,14,52861,-2 FRLN,9,29817,9 CMO,15,60667,2 GERN,16,133881,5 ASMB,22,195597,3 Average,17.7,113676,2.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $72 million in FBRX's case. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand Freeline Therapeutics Holdings plc (NASDAQ:FRLN) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Forte Biosciences, Inc. (NASDAQ:FBRX) is even less popular than FRLN. Our overall hedge fund sentiment score for FBRX is 39. 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. Hedge funds dodged a bullet by taking a bearish stance towards FBRX. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately FBRX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); FBRX investors were disappointed as the stock returned -24% since the end of the third quarter (through 11/27) 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 so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.