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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding IGM Biosciences, Inc. (NASDAQ:IGMS).
Is IGM Biosciences, Inc. (NASDAQ:IGMS) a buy here? Money managers are getting more bullish. The number of long hedge fund bets rose by 11 recently. Our calculations also showed that IGMS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Peter Kolchinsky of RA Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a gander at the new hedge fund action encompassing IGM Biosciences, Inc. (NASDAQ:IGMS).
Hedge fund activity in IGM Biosciences, Inc. (NASDAQ:IGMS)
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11 from the second quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in IGMS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in IGM Biosciences, Inc. (NASDAQ:IGMS) was held by Baker Bros. Advisors, which reported holding $55.8 million worth of stock at the end of September. It was followed by Redmile Group with a $55.8 million position. Other investors bullish on the company included Vivo Capital, RA Capital Management, and Hillhouse Capital Management. In terms of the portfolio weights assigned to each position Redmile Group allocated the biggest weight to IGM Biosciences, Inc. (NASDAQ:IGMS), around 1.87% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, designating 1.2 percent of its 13F equity portfolio to IGMS.
Now, key hedge funds were breaking ground themselves. Baker Bros. Advisors, managed by Julian Baker and Felix Baker, initiated the largest position in IGM Biosciences, Inc. (NASDAQ:IGMS). Baker Bros. Advisors had $55.8 million invested in the company at the end of the quarter. Jeremy Green's Redmile Group also made a $55.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Albert Cha and Frank Kung's Vivo Capital, Peter Kolchinsky's RA Capital Management, and Lei Zhang's Hillhouse Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as IGM Biosciences, Inc. (NASDAQ:IGMS) but similarly valued. We will take a look at Gamco Investors Inc. (NYSE:GBL), Green Brick Partners Inc (NASDAQ:GRBK), Oasis Midstream Partners LP (NYSE:OMP), and Party City Holdco Inc (NYSE:PRTY). This group of stocks' market valuations resemble IGMS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GBL,10,11055,0 GRBK,16,318379,1 OMP,3,7122,-2 PRTY,10,77943,0 Average,9.75,103625,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $152 million in IGMS's case. Green Brick Partners Inc (NASDAQ:GRBK) is the most popular stock in this table. On the other hand Oasis Midstream Partners LP (NYSE:OMP) is the least popular one with only 3 bullish hedge fund positions. IGM Biosciences, Inc. (NASDAQ:IGMS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on IGMS as the stock returned 27.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.