Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Infinity Pharmaceuticals Inc. (NASDAQ:INFI).
Infinity Pharmaceuticals Inc. (NASDAQ:INFI) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of the first quarter of 2020. At the end of this article we will also compare INFI to other stocks including Genocea Biosciences Inc (NASDAQ:GNCA), Steel Connect, Inc. (NASDAQ:STCN), and Centrus Energy Corp. (NYSE:LEU) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_338175" align="aligncenter" width="400"] Felix Baker of Baker Bros.[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's check out the key hedge fund action regarding Infinity Pharmaceuticals Inc. (NASDAQ:INFI).
How have hedgies been trading Infinity Pharmaceuticals Inc. (NASDAQ:INFI)?
At Q1's end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in INFI over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Mark Lampert's Biotechnology Value Fund / BVF Inc has the most valuable position in Infinity Pharmaceuticals Inc. (NASDAQ:INFI), worth close to $14.6 million, amounting to 1.4% of its total 13F portfolio. Coming in second is Renaissance Technologies, which holds a $1.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism include Kerr Neilson's Platinum Asset Management, Julian Baker and Felix Baker's Baker Bros. Advisors and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Biotechnology Value Fund / BVF Inc allocated the biggest weight to Infinity Pharmaceuticals Inc. (NASDAQ:INFI), around 1.36% of its 13F portfolio. Platinum Asset Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to INFI.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the first quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks similar to Infinity Pharmaceuticals Inc. (NASDAQ:INFI). We will take a look at Genocea Biosciences Inc (NASDAQ:GNCA), Steel Connect, Inc. (NASDAQ:STCN), Centrus Energy Corp. (NYSE:LEU), and Pathfinder Bancorp, Inc. (NASDAQ:PBHC). This group of stocks' market caps are closest to INFI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GNCA,10,7765,0 STCN,5,16309,0 LEU,2,560,0 PBHC,1,2533,0 Average,4.5,6792,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $17 million in INFI's case. Genocea Biosciences Inc (NASDAQ:GNCA) is the most popular stock in this table. On the other hand Pathfinder Bancorp, Inc. (NASDAQ:PBHC) is the least popular one with only 1 bullish hedge fund positions. Infinity Pharmaceuticals Inc. (NASDAQ:INFI) 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 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately INFI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on INFI were disappointed as the stock returned 7.1% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.