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In this article we will take a look at whether hedge funds think Surface Oncology, Inc. (NASDAQ:SURF) is 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.
Surface Oncology, Inc. (NASDAQ:SURF) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as AquaBounty Technologies, Inc. (NASDAQ:AQB), Beasley Broadcast Group Inc (NASDAQ:BBGI), and American River Bankshares (NASDAQ:AMRB) to gather more data points. Our calculations also showed that SURF 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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.
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Oleg Nodelman of EcoR1 Capital[/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. Now let's check out the fresh hedge fund action regarding Surface Oncology, Inc. (NASDAQ:SURF).
How have hedgies been trading Surface Oncology, Inc. (NASDAQ:SURF)?
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in SURF a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, EcoR1 Capital, managed by Oleg Nodelman, holds the largest position in Surface Oncology, Inc. (NASDAQ:SURF). EcoR1 Capital has a $2.4 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Mark Lampert of Biotechnology Value Fund / BVF Inc, with a $1.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism include Ken Griffin's Citadel Investment Group, Israel Englander's Millennium Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Surface Oncology, Inc. (NASDAQ:SURF), around 0.25% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, designating 0.17 percent of its 13F equity portfolio to SURF.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the first quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Surface Oncology, Inc. (NASDAQ:SURF) but similarly valued. We will take a look at AquaBounty Technologies, Inc. (NASDAQ:AQB), Beasley Broadcast Group Inc (NASDAQ:BBGI), American River Bankshares (NASDAQ:AMRB), and Network-1 Technologies Inc (NYSE:NTIP). This group of stocks' market caps resemble SURF's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AQB,2,3222,-1 BBGI,2,2755,-1 AMRB,2,4270,0 NTIP,2,2857,0 Average,2,3276,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $6 million in SURF's case. AquaBounty Technologies, Inc. (NASDAQ:AQB) is the most popular stock in this table. On the other hand AquaBounty Technologies, Inc. (NASDAQ:AQB) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Surface Oncology, Inc. (NASDAQ:SURF) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on SURF as the stock returned 132.6% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.