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Is Seres Therapeutics Inc (NASDAQ:MCRB) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Seres Therapeutics Inc (NASDAQ:MCRB) going to take off soon? The smart money is reducing their bets on the stock. The number of long hedge fund bets dropped by 1 in recent months. Our calculations also showed that MCRB 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.
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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. Now we're going to go over the key hedge fund action surrounding Seres Therapeutics Inc (NASDAQ:MCRB).
How are hedge funds trading Seres Therapeutics Inc (NASDAQ:MCRB)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in MCRB a year ago. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the biggest position in Seres Therapeutics Inc (NASDAQ:MCRB). Renaissance Technologies has a $4.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is David E. Shaw of D E Shaw, with a $1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Cliff Asness's AQR Capital Management, Paul Marshall and Ian Wace's Marshall Wace and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Seres Therapeutics Inc (NASDAQ:MCRB), around 0.0037% of its 13F portfolio. Marshall Wace is also relatively very bullish on the stock, setting aside 0.002 percent of its 13F equity portfolio to MCRB.
Judging by the fact that Seres Therapeutics Inc (NASDAQ:MCRB) has witnessed declining sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of fund managers that slashed their positions entirely heading into Q4. Interestingly, Joseph Edelman's Perceptive Advisors dropped the largest investment of the 750 funds watched by Insider Monkey, totaling about $8.1 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund sold off about $1 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Seres Therapeutics Inc (NASDAQ:MCRB) but similarly valued. We will take a look at MCBC Holdings Inc (NASDAQ:MCFT), Tilly's Inc (NYSE:TLYS), Duluth Holdings Inc. (NASDAQ:DLTH), and USD Partners LP (NYSE:USDP). This group of stocks' market valuations are closest to MCRB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MCFT,17,75512,0 TLYS,14,57115,1 DLTH,9,13309,-1 USDP,3,3292,0 Average,10.75,37307,0 [/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 $37 million. That figure was $7 million in MCRB's case. MCBC Holdings Inc (NASDAQ:MCFT) is the most popular stock in this table. On the other hand USD Partners LP (NYSE:USDP) is the least popular one with only 3 bullish hedge fund positions. Seres Therapeutics Inc (NASDAQ:MCRB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately MCRB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MCRB investors were disappointed as the stock returned -1.5% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.