Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Omeros Corporation (NASDAQ:OMER).
Omeros Corporation (NASDAQ:OMER) shareholders have witnessed an increase in hedge fund interest of late. OMER was in 9 hedge funds' portfolios at the end of March. There were 7 hedge funds in our database with OMER holdings at the end of the previous quarter. Our calculations also showed that OMER isn't among the 30 most popular stocks among hedge funds (click for Q1 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 58 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.
[caption id="attachment_256989" align="aligncenter" width="400"] Dmitry Balyasny of Balyasny Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a look at the key hedge fund action regarding Omeros Corporation (NASDAQ:OMER).
What have hedge funds been doing with Omeros Corporation (NASDAQ:OMER)?
Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in OMER a year ago. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Consonance Capital Management held the most valuable stake in Omeros Corporation (NASDAQ:OMER), which was worth $59.9 million at the end of the third quarter. On the second spot was Cormorant Asset Management which amassed $33.7 million worth of shares. D E Shaw, Millennium Management, and Citadel Investment Group 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 Consonance Capital Management allocated the biggest weight to Omeros Corporation (NASDAQ:OMER), around 4.46% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, setting aside 1.57 percent of its 13F equity portfolio to OMER.
Consequently, key money managers have jumped into Omeros Corporation (NASDAQ:OMER) headfirst. Millennium Management, managed by Israel Englander, assembled the most outsized position in Omeros Corporation (NASDAQ:OMER). Millennium Management had $2.7 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new OMER investors: Dmitry Balyasny's Balyasny Asset Management, John Overdeck and David Siegel's Two Sigma Advisors, and Mike Vranos's Ellington.
Let's also examine hedge fund activity in other stocks similar to Omeros Corporation (NASDAQ:OMER). We will take a look at Heritage Financial Corporation (NASDAQ:HFWA), Aprea Therapeutics, Inc. (NASDAQ:APRE), Applied Therapeutics, Inc. (NASDAQ:APLT), and Transportadora de Gas del Sur SA (NYSE:TGS). This group of stocks' market values are closest to OMER's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HFWA,6,12043,0 APRE,6,159769,1 APLT,16,173748,9 TGS,6,11344,-4 Average,8.5,89226,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $125 million in OMER's case. Applied Therapeutics, Inc. (NASDAQ:APLT) is the most popular stock in this table. On the other hand Heritage Financial Corporation (NASDAQ:HFWA) is the least popular one with only 6 bullish hedge fund positions. Omeros Corporation (NASDAQ:OMER) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately OMER wasn't nearly as popular as these 10 stocks and hedge funds that were betting on OMER were disappointed as the stock returned 17.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.