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Hedge Funds Have Never Been Less Bullish On Theravance Biopharma Inc (TBPH)

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Theravance Biopharma Inc (NASDAQ:TBPH).

Theravance Biopharma Inc (NASDAQ:TBPH) has experienced a decrease in hedge fund sentiment lately. Our calculations also showed that TBPH 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.

5 Most Popular Stocks Among Hedge Funds

According to most investors, hedge funds are seen as unimportant, old financial tools of years past. While there are greater than 8000 funds in operation today, Our experts look at the elite of this group, approximately 750 funds. Most estimates calculate that this group of people oversee the lion's share of all hedge funds' total asset base, and by monitoring their matchless stock picks, Insider Monkey has uncovered a few investment strategies that have historically exceeded the market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_26423" align="alignnone" width="600"] Seth Klarman of Baupost Group[/caption]

BAUPOST GROUP Seth Klarman

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 regarding Theravance Biopharma Inc (NASDAQ:TBPH).

How have hedgies been trading Theravance Biopharma Inc (NASDAQ:TBPH)?

Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TBPH over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TBPH A Good Stock To Buy?

More specifically, Woodford Investment Management was the largest shareholder of Theravance Biopharma Inc (NASDAQ:TBPH), with a stake worth $221.1 million reported as of the end of September. Trailing Woodford Investment Management was Baupost Group, which amassed a stake valued at $181.3 million. Chescapmanager LLC, Rock Springs Capital Management, and Royce & Associates 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 Woodford Investment Management allocated the biggest weight to Theravance Biopharma Inc (NASDAQ:TBPH), around 71.3% of its 13F portfolio. Baupost Group is also relatively very bullish on the stock, designating 2.05 percent of its 13F equity portfolio to TBPH.

Since Theravance Biopharma Inc (NASDAQ:TBPH) has faced a decline in interest from the smart money, we can see that there were a few hedge funds that elected to cut their positions entirely heading into Q4. Intriguingly, Xiuping Li's Opti Capital Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, worth close to $1.3 million in stock, and Marc Majzner's Clearline Capital was right behind this move, as the fund sold off about $0.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Theravance Biopharma Inc (NASDAQ:TBPH) but similarly valued. These stocks are Neenah Paper, Inc. (NYSE:NP), Enterprise Financial Services Corp (NASDAQ:EFSC), Talos Energy, Inc. (NYSE:TALO), and John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS). All of these stocks' market caps are closest to TBPH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NP,8,14953,1 EFSC,12,56533,-1 TALO,15,64673,1 JBSS,15,55397,5 Average,12.5,47889,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $428 million in TBPH's case. Talos Energy, Inc. (NYSE:TALO) is the most popular stock in this table. On the other hand Neenah Paper, Inc. (NYSE:NP) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Theravance Biopharma Inc (NASDAQ:TBPH) is even less popular than NP. Hedge funds clearly dropped the ball on TBPH as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on TBPH as the stock returned 11.7% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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