The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds' movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Epizyme Inc (NASDAQ:EPZM) and find out how it is affected by hedge funds' moves.
Epizyme Inc (NASDAQ:EPZM) has seen an increase in hedge fund sentiment lately. EPZM was in 18 hedge funds' portfolios at the end of December. There were 15 hedge funds in our database with EPZM positions at the end of the previous quarter. Our calculations also showed that epzm isn't among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a glance at the new hedge fund action regarding Epizyme Inc (NASDAQ:EPZM).
What have hedge funds been doing with Epizyme Inc (NASDAQ:EPZM)?
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in EPZM a year ago. So, let's find out 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, Palo Alto Investors, managed by William Leland Edwards, holds the biggest position in Epizyme Inc (NASDAQ:EPZM). Palo Alto Investors has a $42.7 million position in the stock, comprising 2.3% of its 13F portfolio. On Palo Alto Investors's heels is Redmile Group, led by Jeremy Green, holding a $40.9 million position; 1.6% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism contain Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management, James A. Silverman's Opaleye Management and Jim Tananbaum's Foresite Capital.
Consequently, some big names were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, initiated the most valuable position in Epizyme Inc (NASDAQ:EPZM). Renaissance Technologies had $1.1 million invested in the company at the end of the quarter. David Costen Haley's HBK Investments also made a $0.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Noam Gottesman's GLG Partners, John Overdeck and David Siegel's Two Sigma Advisors, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.
Let's check out hedge fund activity in other stocks similar to Epizyme Inc (NASDAQ:EPZM). These stocks are Hometrust Bancshares Inc (NASDAQ:HTBI), Transenterix Inc (NYSE:TRXC), Forty Seven, Inc. (NASDAQ:FTSV), and Whitestone REIT (NYSE:WSR). This group of stocks' market values are similar to EPZM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HTBI,9,65265,0 TRXC,8,11314,-6 FTSV,6,23618,-1 WSR,6,15615,3 Average,7.25,28953,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $121 million in EPZM's case. Hometrust Bancshares Inc (NASDAQ:HTBI) is the most popular stock in this table. On the other hand Forty Seven, Inc. (NASDAQ:FTSV) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Epizyme Inc (NASDAQ:EPZM) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on EPZM as the stock returned 105.8% 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.