We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA).
Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) shareholders have witnessed an increase in activity from the world's largest hedge funds of late. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) was in 42 hedge funds' portfolios at the end of June. The all time high for this statistics is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 36 hedge funds in our database with MNTA holdings at the end of March. Our calculations also showed that MNTA 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.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.
Peter Kolchinsky of RA Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best artificial intelligence stocks to pick the best growth 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let's take a gander at the key hedge fund action surrounding Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA).
What does smart money think about Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)?
At the end of June, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in MNTA a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Redmile Group held the most valuable stake in Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), which was worth $156.5 million at the end of the third quarter. On the second spot was RA Capital Management which amassed $84.2 million worth of shares. Maverick Capital, Adage Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ghost Tree Capital allocated the biggest weight to Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), around 3.38% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, designating 3.21 percent of its 13F equity portfolio to MNTA.
As aggregate interest increased, specific money managers were leading the bulls' herd. Viking Global, managed by Andreas Halvorsen, assembled the most outsized position in Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). Viking Global had $31.5 million invested in the company at the end of the quarter. Christopher James's Partner Fund Management also initiated a $19.3 million position during the quarter. The other funds with new positions in the stock are Brian Ashford-Russell and Tim Woolley's Polar Capital, Bhagwan Jay Rao's Integral Health Asset Management, and John W. Rende's Copernicus Capital Management.
Let's check out hedge fund activity in other stocks similar to Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). These stocks are Janus Henderson Group plc (NYSE:JHG), Equity Commonwealth (NYSE:EQC), ICL Group Ltd. (NYSE:ICL), Graphic Packaging Holding Company (NYSE:GPK), ChemoCentryx Inc (NASDAQ:CCXI), Amicus Therapeutics, Inc. (NASDAQ:FOLD), and Highwoods Properties Inc (NYSE:HIW). This group of stocks' market caps match MNTA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JHG,30,215555,7 EQC,23,215349,3 ICL,5,6303,2 GPK,32,274367,-1 CCXI,31,701760,1 FOLD,32,1316185,4 HIW,30,142676,15 Average,26.1,410314,4.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $410 million. That figure was $733 million in MNTA's case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is more popular among hedge funds. Our overall hedge fund sentiment score for MNTA is 90. 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. 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 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Momenta was sold to J&J earlier this month and delivered a nearly 60% gain to the hedge funds that bet on the stock.
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Disclosure: None. This article was originally published at Insider Monkey.