How do we determine whether Kadmon Holdings, Inc. (NYSE:KDMN) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Kadmon Holdings, Inc. (NYSE:KDMN) a bargain? Prominent investors are taking an optimistic view. The number of long hedge fund bets improved by 5 lately. Our calculations also showed that KDMN 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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman, GLG Partners[/caption]
We're going to check out the fresh hedge fund action regarding Kadmon Holdings, Inc. (NYSE:KDMN).
What have hedge funds been doing with Kadmon Holdings, Inc. (NYSE:KDMN)?
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KDMN over the last 15 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in Kadmon Holdings, Inc. (NYSE:KDMN) was held by Perceptive Advisors, which reported holding $34.8 million worth of stock at the end of March. It was followed by Vivo Capital with a $33.3 million position. Other investors bullish on the company included Consonance Capital Management, Third Point, and Millennium Management.
As aggregate interest increased, key hedge funds were breaking ground themselves. Consonance Capital Management, managed by Mitchell Blutt, established the largest position in Kadmon Holdings, Inc. (NYSE:KDMN). Consonance Capital Management had $30.7 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron's Algert Coldiron Investors also made a $0.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin's Citadel Investment Group, Noam Gottesman's GLG Partners, and Michael Gelband's ExodusPoint Capital.
Let's check out hedge fund activity in other stocks similar to Kadmon Holdings, Inc. (NYSE:KDMN). These stocks are Peoples Financial Services Corp. (NASDAQ:PFIS), Daktronics, Inc. (NASDAQ:DAKT), BioLife Solutions, Inc. (NASDAQ:BLFS), and RR Donnelley & Sons Company (NYSE:RRD). This group of stocks' market values resemble KDMN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFIS,1,2374,0 DAKT,10,15269,-1 BLFS,15,83044,3 RRD,14,21806,-3 Average,10,30623,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $151 million in KDMN's case. BioLife Solutions, Inc. (NASDAQ:BLFS) is the most popular stock in this table. On the other hand Peoples Financial Services Corp. (NASDAQ:PFIS) is the least popular one with only 1 bullish hedge fund positions. Kadmon Holdings, Inc. (NYSE:KDMN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately KDMN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KDMN were disappointed as the stock returned -31.8% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.