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Is Five Prime Therapeutics Inc (NASDAQ:FPRX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is FPRX a good stock to buy now? Five Prime Therapeutics Inc (NASDAQ:FPRX) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 19 hedge funds' portfolios at the end of September. Our calculations also showed that FPRX 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Sientra Inc (NASDAQ:SIEN), Acacia Research Corporation (NASDAQ:ACTG), and Castlight Health Inc (NYSE:CSLT) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are over 8000 funds in operation at present, Our experts look at the bigwigs of this club, about 850 funds. It is estimated that this group of investors watch over the majority of all hedge funds' total asset base, and by observing their top stock picks, Insider Monkey has brought to light several investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Oleg Nodelman of EcoR1 Capital
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. Now let's take a look at the latest hedge fund action encompassing Five Prime Therapeutics Inc (NASDAQ:FPRX).
Do Hedge Funds Think FPRX Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. By comparison, 18 hedge funds held shares or bullish call options in FPRX a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Biotechnology Value Fund / BVF Inc held the most valuable stake in Five Prime Therapeutics Inc (NASDAQ:FPRX), which was worth $37.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $8 million worth of shares. Two Sigma Advisors, Endurant Capital Management, and EcoR1 Capital 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 Five Prime Therapeutics Inc (NASDAQ:FPRX), around 2.05% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, earmarking 0.59 percent of its 13F equity portfolio to FPRX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was HighVista Strategies).
Let's go over hedge fund activity in other stocks similar to Five Prime Therapeutics Inc (NASDAQ:FPRX). We will take a look at Sientra Inc (NASDAQ:SIEN), Acacia Research Corporation (NASDAQ:ACTG), Castlight Health Inc (NYSE:CSLT), PICO Holdings Inc (NASDAQ:PICO), Stellus Capital Investment Corporation (NYSE:SCM), Telenav Inc (NASDAQ:TNAV), and NewAge Inc (NASDAQ:NBEV). This group of stocks' market values are closest to FPRX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SIEN,11,26348,2 ACTG,12,23771,-2 CSLT,14,26703,-4 PICO,10,22333,-3 SCM,6,4400,0 TNAV,11,31469,1 NBEV,4,712,-1 Average,9.7,19391,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $61 million in FPRX's case. Castlight Health Inc (NYSE:CSLT) is the most popular stock in this table. On the other hand NewAge Inc (NASDAQ:NBEV) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Five Prime Therapeutics Inc (NASDAQ:FPRX) is more popular among hedge funds. Our overall hedge fund sentiment score for FPRX is 77.8. 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. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on FPRX as the stock returned 273.4% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.