How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Moderna, Inc. (NASDAQ:MRNA) and determine whether hedge funds had an edge regarding this stock.
Moderna, Inc. (NASDAQ:MRNA) has experienced an increase in activity from the world's largest hedge funds of late. Moderna, Inc. (NASDAQ:MRNA) was in 37 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 25 hedge funds in our database with MRNA positions at the end of the first quarter. Our calculations also showed that MRNA isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
According to most traders, hedge funds are assumed to be slow, outdated financial tools of years past. While there are more than 8000 funds in operation at the moment, We look at the moguls of this group, about 850 funds. These investment experts have their hands on most of the hedge fund industry's total capital, and by keeping an eye on their highest performing investments, Insider Monkey has unearthed a few investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Phillip Gross of Adage Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let's go over the latest hedge fund action regarding Moderna, Inc. (NASDAQ:MRNA).
How are hedge funds trading Moderna, Inc. (NASDAQ:MRNA)?
Heading into the third quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 48% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MRNA over the last 20 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Moderna, Inc. (NASDAQ:MRNA) was held by Theleme Partners, which reported holding $548.8 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $102.7 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Theleme Partners allocated the biggest weight to Moderna, Inc. (NASDAQ:MRNA), around 25.9% of its 13F portfolio. Key Square Capital Management is also relatively very bullish on the stock, setting aside 5.62 percent of its 13F equity portfolio to MRNA.
As one would reasonably expect, specific money managers have jumped into Moderna, Inc. (NASDAQ:MRNA) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in Moderna, Inc. (NASDAQ:MRNA). Balyasny Asset Management had $30.9 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson's Adage Capital Management also made a $20.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Simon Sadler's Segantii Capital, Renaissance Technologies, and Charles Clough's Clough Capital Partners.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Moderna, Inc. (NASDAQ:MRNA) but similarly valued. These stocks are Motorola Solutions Inc (NYSE:MSI), V.F. Corporation (NYSE:VFC), Parker-Hannifin Corporation (NYSE:PH), Twitter Inc (NYSE:TWTR), Marvell Technology Group Ltd. (NASDAQ:MRVL), American Water Works Company, Inc. (NYSE:AWK), and XP Inc. (NASDAQ:XP). This group of stocks' market values resemble MRNA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSI,36,535822,2 VFC,27,558958,8 PH,39,1172205,7 TWTR,68,1278023,13 MRVL,41,664690,12 AWK,30,653000,0 XP,21,430821,8 Average,37.4,756217,7.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.4 hedge funds with bullish positions and the average amount invested in these stocks was $756 million. That figure was $788 million in MRNA's case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand XP Inc. (NASDAQ:XP) is the least popular one with only 21 bullish hedge fund positions. Moderna, Inc. (NASDAQ:MRNA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MRNA is 57. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 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 33% in 2020 through the end of August and surpassed the market by 23.2 percentage points. Unfortunately MRNA wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MRNA investors were disappointed as the stock returned 1.1% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.