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 Molecular Templates, Inc. (NASDAQ:MTEM).
Molecular Templates, Inc. (NASDAQ:MTEM) investors should pay attention to a decrease in enthusiasm from smart money lately. Our calculations also showed that MTEM 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_364882" align="aligncenter" width="450"] Mark Kingdon of Kingdon Capital[/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. Let's review the latest hedge fund action surrounding Molecular Templates, Inc. (NASDAQ:MTEM).
How have hedgies been trading Molecular Templates, Inc. (NASDAQ:MTEM)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in MTEM a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Biotechnology Value Fund was the largest shareholder of Molecular Templates, Inc. (NASDAQ:MTEM), with a stake worth $22.3 million reported as of the end of September. Trailing Biotechnology Value Fund was Perceptive Advisors, which amassed a stake valued at $13 million. Kingdon Capital, Sectoral Asset Management, and Baker Bros. Advisors 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 allocated the biggest weight to Molecular Templates, Inc. (NASDAQ:MTEM), around 2.34% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, setting aside 0.82 percent of its 13F equity portfolio to MTEM.
Seeing as Molecular Templates, Inc. (NASDAQ:MTEM) has witnessed bearish sentiment from hedge fund managers, it's safe to say that there were a few hedge funds that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, Parvinder Thiara's Athanor Capital cut the biggest stake of all the hedgies watched by Insider Monkey, totaling an estimated $0.2 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund dropped about $0.1 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Molecular Templates, Inc. (NASDAQ:MTEM) but similarly valued. These stocks are Permian Basin Royalty Trust (NYSE:PBT), Immersion Corporation (NASDAQ:IMMR), Unity Bancorp, Inc. (NASDAQ:UNTY), and Stratus Properties Inc. (NASDAQ:STRS). This group of stocks' market values resemble MTEM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PBT,5,7687,-1 IMMR,16,91386,2 UNTY,4,35275,0 STRS,3,38208,0 Average,7,43139,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $47 million in MTEM's case. Immersion Corporation (NASDAQ:IMMR) is the most popular stock in this table. On the other hand Stratus Properties Inc. (NASDAQ:STRS) is the least popular one with only 3 bullish hedge fund positions. Molecular Templates, Inc. (NASDAQ:MTEM) 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 MTEM as the stock returned 97.7% 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.