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Hedge Funds Are Dumping ImmunoGen, Inc. (IMGN)

Nina Todic

Amid an overall bull market, many stocks that smart money investors were collectively bullish on 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. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

ImmunoGen, Inc. (NASDAQ:IMGN) investors should pay attention to a decrease in enthusiasm from smart money in recent months. IMGN was in 11 hedge funds' portfolios at the end of September. There were 15 hedge funds in our database with IMGN positions at the end of the previous quarter. Our calculations also showed that IMGN 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.

5 Most Popular Stocks Among Hedge Funds

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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_758500" align="aligncenter" width="450"] Daniel Gold of QVT Financial[/caption]

Daniel Gold QVT Financial

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 glance at the latest hedge fund action regarding ImmunoGen, Inc. (NASDAQ:IMGN).

What does smart money think about ImmunoGen, Inc. (NASDAQ:IMGN)?

At Q3's end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in IMGN a year ago. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, Redmile Group held the most valuable stake in ImmunoGen, Inc. (NASDAQ:IMGN), which was worth $35.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $20.6 million worth of shares. Millennium Management, QVT Financial, and D E Shaw 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 Redmile Group allocated the biggest weight to ImmunoGen, Inc. (NASDAQ:IMGN), around 1.18% of its 13F portfolio. QVT Financial is also relatively very bullish on the stock, dishing out 0.68 percent of its 13F equity portfolio to IMGN.

Seeing as ImmunoGen, Inc. (NASDAQ:IMGN) has experienced falling interest from the smart money, it's easy to see that there exists a select few funds that slashed their full holdings last quarter. Intriguingly, Marc Majzner's Clearline Capital sold off the biggest position of the 750 funds watched by Insider Monkey, totaling close to $1.5 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace, also said goodbye to its stock, about $0.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 4 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to ImmunoGen, Inc. (NASDAQ:IMGN). We will take a look at Westport Fuel Systems Inc. (NASDAQ:WPRT), Exantas Capital Corp. (NYSE:XAN), Camtek LTD. (NASDAQ:CAMT), and TrueCar Inc (NASDAQ:TRUE). This group of stocks' market valuations are closest to IMGN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WPRT,13,38865,0 XAN,15,67814,-1 CAMT,10,24660,0 TRUE,15,66619,0 Average,13.25,49490,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $71 million in IMGN's case. Exantas Capital Corp. (NYSE:XAN) is the most popular stock in this table. On the other hand Camtek LTD. (NASDAQ:CAMT) is the least popular one with only 10 bullish hedge fund positions. ImmunoGen, Inc. (NASDAQ:IMGN) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on IMGN as the stock returned 49.2% during the first two months of Q4 and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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