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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Geron Corporation (NASDAQ:GERN)? The smart money sentiment can provide an answer to this question.
Is GERN a good stock to buy now? The best stock pickers were buying. The number of long hedge fund positions rose by 5 recently. Geron Corporation (NASDAQ:GERN) was in 16 hedge funds' portfolios at the end of September. The all time high for this statistic is 12. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GERN 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). There were 11 hedge funds in our database with GERN positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are perceived as slow, old financial tools of years past. While there are over 8000 funds with their doors open at the moment, Our experts hone in on the moguls of this group, approximately 850 funds. It is estimated that this group of investors watch over the lion's share of the smart money's total capital, and by following their highest performing equity investments, Insider Monkey has discovered a few investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year 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 .
Andre Perold of HighVista Strategies
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 review the key hedge fund action regarding Geron Corporation (NASDAQ:GERN).
Do Hedge Funds Think GERN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 45% from one quarter earlier. On the other hand, there were a total of 1 hedge funds with a bullish position in GERN a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, RA Capital Management, managed by Peter Kolchinsky, holds the biggest position in Geron Corporation (NASDAQ:GERN). RA Capital Management has a $52.4 million position in the stock, comprising 1% of its 13F portfolio. Coming in second is Oleg Nodelman of EcoR1 Capital, with a $33.5 million position; 2.4% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions include Joseph Edelman's Perceptive Advisors, Jeffrey Jay and David Kroin's Great Point Partners and Srini Akkaraju and Michael Dybbs's Samsara BioCapital. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Geron Corporation (NASDAQ:GERN), around 2.39% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, earmarking 1.52 percent of its 13F equity portfolio to GERN.
As aggregate interest increased, key money managers have jumped into Geron Corporation (NASDAQ:GERN) headfirst. D E Shaw, managed by D. E. Shaw, assembled the most valuable position in Geron Corporation (NASDAQ:GERN). D E Shaw had $0.6 million invested in the company at the end of the quarter. Andre F. Perold's HighVista Strategies also made a $0.5 million investment in the stock during the quarter. The other funds with brand new GERN positions are Parvinder Thiara's Athanor Capital, Cliff Asness's AQR Capital Management, and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks similar to Geron Corporation (NASDAQ:GERN). We will take a look at Assembly Biosciences Inc (NASDAQ:ASMB), TrueCar Inc (NASDAQ:TRUE), Apollo Investment Corp. (NASDAQ:AINV), ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), Ellington Financial Inc. (NYSE:EFC), SIGA Technologies Inc. (NASDAQ:SIGA), and Turning Point Brands, Inc. (NYSE:TPB). This group of stocks' market caps resemble GERN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASMB,22,195597,3 TRUE,18,103244,1 AINV,5,21619,-4 ZIOP,13,102366,2 EFC,11,37613,3 SIGA,16,52498,5 TPB,24,98061,12 Average,15.6,87285,3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $134 million in GERN's case. Turning Point Brands, Inc. (NYSE:TPB) is the most popular stock in this table. On the other hand Apollo Investment Corp. (NASDAQ:AINV) is the least popular one with only 5 bullish hedge fund positions. Geron Corporation (NASDAQ:GERN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GERN is 68.9. 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 positive signal but 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 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately GERN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GERN were disappointed as the stock returned 0% since the end of September (through 12/14) 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 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.