We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Karyopharm Therapeutics Inc (NASDAQ:KPTI).
Hedge fund interest in Karyopharm Therapeutics Inc (NASDAQ:KPTI) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Navigator Holdings Ltd (NYSE:NVGS), Translate Bio, Inc. (NASDAQ:TBIO), and nLIGHT, Inc. (NASDAQ:LASR) to gather more data points. Our calculations also showed that KPTI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_758402" align="alignnone" width="600"] William Leland Edwards of Palo Alto Investors[/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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a peek at the new hedge fund action regarding Karyopharm Therapeutics Inc (NASDAQ:KPTI).
Hedge fund activity in Karyopharm Therapeutics Inc (NASDAQ:KPTI)
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KPTI over the last 17 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Karyopharm Therapeutics Inc (NASDAQ:KPTI) was held by venBio Select Advisor, which reported holding $58.2 million worth of stock at the end of September. It was followed by Consonance Capital Management with a $56.2 million position. Other investors bullish on the company included Palo Alto Investors, Adage Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Karyopharm Therapeutics Inc (NASDAQ:KPTI), around 5.56% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, setting aside 3.1 percent of its 13F equity portfolio to KPTI.
Since Karyopharm Therapeutics Inc (NASDAQ:KPTI) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few money managers that elected to cut their positions entirely by the end of the third quarter. Intriguingly, Steve Cohen's Point72 Asset Management cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, worth close to $15.6 million in call options, and Israel Englander's Millennium Management was right behind this move, as the fund cut about $3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Karyopharm Therapeutics Inc (NASDAQ:KPTI) but similarly valued. We will take a look at Navigator Holdings Ltd (NYSE:NVGS), Translate Bio, Inc. (NASDAQ:TBIO), nLIGHT, Inc. (NASDAQ:LASR), and Century Aluminum Co (NASDAQ:CENX). This group of stocks' market caps resemble KPTI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVGS,15,276019,1 TBIO,10,228827,0 LASR,6,41084,1 CENX,12,27232,-2 Average,10.75,143291,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $232 million in KPTI's case. Navigator Holdings Ltd (NYSE:NVGS) is the most popular stock in this table. On the other hand nLIGHT, Inc. (NASDAQ:LASR) is the least popular one with only 6 bullish hedge fund positions. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on KPTI as the stock returned 82.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.