The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Melinta Therapeutics, Inc. (NASDAQ:MLNT) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Melinta Therapeutics, Inc. (NASDAQ:MLNT) has experienced a decrease in hedge fund sentiment recently. MLNT was in 4 hedge funds' portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with MLNT positions at the end of the previous quarter. Our calculations also showed that MLNT 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's take a look at the new hedge fund action encompassing Melinta Therapeutics, Inc. (NASDAQ:MLNT).
Hedge fund activity in Melinta Therapeutics, Inc. (NASDAQ:MLNT)
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in MLNT a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the largest position in Melinta Therapeutics, Inc. (NASDAQ:MLNT). Renaissance Technologies has a $2.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies's heels is Sculptor Capital, with a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism consist of Ken Griffin's Citadel Investment Group, William Leland Edwards's Palo Alto Investors and . In terms of the portfolio weights assigned to each position Sculptor Capital allocated the biggest weight to Melinta Therapeutics, Inc. (NASDAQ:MLNT), around 0.004% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, setting aside 0.0026 percent of its 13F equity portfolio to MLNT.
Due to the fact that Melinta Therapeutics, Inc. (NASDAQ:MLNT) has faced a decline in interest from the smart money, it's safe to say that there was a specific group of hedgies who were dropping their positions entirely heading into Q4. At the top of the heap, Israel Englander's Millennium Management sold off the biggest investment of all the hedgies monitored by Insider Monkey, valued at about $0.8 million in stock, and David E. Shaw's D E Shaw was right behind this move, as the fund dumped about $0.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Melinta Therapeutics, Inc. (NASDAQ:MLNT) but similarly valued. These stocks are CohBar, Inc. (NASDAQ:CWBR), Lincoln Educational Services Corporation (NASDAQ:LINC), Ascena Retail Group Inc (NASDAQ:ASNA), and Vermillion, Inc. (NASDAQ:VRML). All of these stocks' market caps are similar to MLNT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CWBR,4,509,2 LINC,4,12664,-1 ASNA,12,10244,0 VRML,4,2683,1 Average,6,6525,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $3 million in MLNT's case. Ascena Retail Group Inc (NASDAQ:ASNA) is the most popular stock in this table. On the other hand CohBar, Inc. (NASDAQ:CWBR) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Melinta Therapeutics, Inc. (NASDAQ:MLNT) is even less popular than CWBR. Hedge funds dodged a bullet by taking a bearish stance towards MLNT. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MLNT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MLNT investors were disappointed as the stock returned -57.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.