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Is G1 Therapeutics, Inc. (NASDAQ:GTHX) 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 GTHX a good stock to buy now? G1 Therapeutics, Inc. (NASDAQ:GTHX) shareholders have witnessed an increase in hedge fund interest lately. G1 Therapeutics, Inc. (NASDAQ:GTHX) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 20. Our calculations also showed that GTHX 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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.
Henrik Rhenman of Rhenman & Partners Asset 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. Now we're going to take a gander at the fresh hedge fund action encompassing G1 Therapeutics, Inc. (NASDAQ:GTHX).
Do Hedge Funds Think GTHX Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the second quarter of 2020. On the other hand, there were a total of 15 hedge funds with a bullish position in GTHX a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Hillhouse Capital Management was the largest shareholder of G1 Therapeutics, Inc. (NASDAQ:GTHX), with a stake worth $11 million reported as of the end of September. Trailing Hillhouse Capital Management was Millennium Management, which amassed a stake valued at $6.4 million. Citadel Investment Group, Burrage Capital Management, and Rhenman & Partners Asset Management 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 Burrage Capital Management allocated the biggest weight to G1 Therapeutics, Inc. (NASDAQ:GTHX), around 2.08% of its 13F portfolio. Birchview Capital is also relatively very bullish on the stock, earmarking 0.31 percent of its 13F equity portfolio to GTHX.
As one would reasonably expect, key hedge funds were leading the bulls' herd. Millennium Management, managed by Israel Englander, assembled the most outsized position in G1 Therapeutics, Inc. (NASDAQ:GTHX). Millennium Management had $6.4 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also initiated a $0.7 million position during the quarter. The following funds were also among the new GTHX investors: Greg Eisner's Engineers Gate Manager and Paul Tudor Jones's Tudor Investment Corp.
Let's now take a look at hedge fund activity in other stocks similar to G1 Therapeutics, Inc. (NASDAQ:GTHX). We will take a look at Mechel PAO (NYSE:MTL), eGain Corporation (NASDAQ:EGAN), Luther Burbank Corporation (NASDAQ:LBC), Boston Omaha Corporation (NASDAQ:BOMN), Catchmark Timber Trust Inc (NYSE:CTT), Aegion Corp (NASDAQ:AEGN), and Mercer International Inc. (NASDAQ:MERC). This group of stocks' market valuations are similar to GTHX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTL,3,1788,0 EGAN,11,36330,0 LBC,4,3020,2 BOMN,5,166210,-7 CTT,13,53862,4 AEGN,9,13719,-1 MERC,13,82614,3 Average,8.3,51078,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.3 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $31 million in GTHX's case. Catchmark Timber Trust Inc (NYSE:CTT) is the most popular stock in this table. On the other hand Mechel PAO (NYSE:MTL) is the least popular one with only 3 bullish hedge fund positions. G1 Therapeutics, Inc. (NASDAQ:GTHX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GTHX is 76.5. 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on GTHX as the stock returned 75.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.