In this article we will check out the progression of hedge fund sentiment towards Stealth BioTherapeutics Corp (NASDAQ:MITO) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Stealth BioTherapeutics Corp (NASDAQ:MITO) has seen an increase in enthusiasm from smart money recently. MITO was in 4 hedge funds' portfolios at the end of the first quarter of 2020. There were 1 hedge funds in our database with MITO holdings at the end of the previous quarter. Our calculations also showed that MITO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_140292" align="aligncenter" width="400"] Israel Englander of Millennium Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to go over the new hedge fund action regarding Stealth BioTherapeutics Corp (NASDAQ:MITO).
What does smart money think about Stealth BioTherapeutics Corp (NASDAQ:MITO)?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 300% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MITO over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Prosight Capital, managed by Lawrence Hawkins, holds the largest position in Stealth BioTherapeutics Corp (NASDAQ:MITO). Prosight Capital has a $0.4 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $0.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Neil Shahrestani's Ikarian Capital, Israel Englander's Millennium Management and . In terms of the portfolio weights assigned to each position Prosight Capital allocated the biggest weight to Stealth BioTherapeutics Corp (NASDAQ:MITO), around 0.19% of its 13F portfolio. Ikarian Capital is also relatively very bullish on the stock, setting aside 0.0035 percent of its 13F equity portfolio to MITO.
As aggregate interest increased, key hedge funds were breaking ground themselves. Prosight Capital, managed by Lawrence Hawkins, established the most valuable position in Stealth BioTherapeutics Corp (NASDAQ:MITO). Prosight Capital had $0.4 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.2 million position during the quarter. The only other fund with a brand new MITO position is Israel Englander's Millennium Management.
Let's check out hedge fund activity in other stocks similar to Stealth BioTherapeutics Corp (NASDAQ:MITO). These stocks are CohBar, Inc. (NASDAQ:CWBR), Kingsway Financial Services Inc. (NYSE:KFS), The LGL Group, Inc. (NYSE:LGL), and Urban One, Inc. (NASDAQ:UONEK). All of these stocks' market caps match MITO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CWBR,2,241,0 KFS,2,643,0 LGL,5,7650,1 UONEK,3,5273,-1 Average,3,3452,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $1 million in MITO's case. The LGL Group, Inc. (NYSE:LGL) is the most popular stock in this table. On the other hand CohBar, Inc. (NASDAQ:CWBR) is the least popular one with only 2 bullish hedge fund positions. Stealth BioTherapeutics Corp (NASDAQ:MITO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on MITO as the stock returned 58.1% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.