A market surge in the first quarter, spurred by easing global macroeconomic concerns and Powell's pivot ended up having a positive impact on the markets and many hedge funds as a result. The stocks of smaller companies which were especially hard hit during the fourth quarter slightly outperformed the market during the first quarter. Unfortunately, Trump is unpredictable and volatility returned in the second quarter and smaller-cap stocks went back to selling off. We finished compiling the latest 13F filings to get an idea about what hedge funds are thinking about the overall market as well as individual stocks. In this article we will study the hedge fund sentiment to see how those concerns affected their ownership of Karyopharm Therapeutics Inc (NASDAQ:KPTI) during the quarter.
Karyopharm Therapeutics Inc (NASDAQ:KPTI) investors should be aware of a decrease in hedge fund interest lately. Our calculations also showed that KPTI isn't among the 30 most popular stocks among hedge funds.
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 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 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 our short portfolio.
[caption id="attachment_758402" align="aligncenter" width="450"] William Leland Edwards of Palo Alto Investors[/caption]
Let's take a peek at the latest hedge fund action regarding Karyopharm Therapeutics Inc (NASDAQ:KPTI).
How have hedgies been trading Karyopharm Therapeutics Inc (NASDAQ:KPTI)?
Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KPTI over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Palo Alto Investors held the most valuable stake in Karyopharm Therapeutics Inc (NASDAQ:KPTI), which was worth $30.7 million at the end of the first quarter. On the second spot was Consonance Capital Management which amassed $30.1 million worth of shares. Moreover, Millennium Management, Citadel Investment Group, and Renaissance Technologies were also bullish on Karyopharm Therapeutics Inc (NASDAQ:KPTI), allocating a large percentage of their portfolios to this stock.
Due to the fact that Karyopharm Therapeutics Inc (NASDAQ:KPTI) has witnessed declining sentiment from the smart money, logic holds that there exists a select few money managers that slashed their positions entirely heading into Q3. At the top of the heap, Wayne Holman's Ridgeback Capital Management cut the biggest position of the 700 funds watched by Insider Monkey, totaling an estimated $37 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund sold off about $14.4 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Karyopharm Therapeutics Inc (NASDAQ:KPTI) but similarly valued. These stocks are Jumei International Holding Ltd (NYSE:JMEI), Dorian LPG Ltd (NYSE:LPG), Ferroglobe PLC (NASDAQ:GSM), and Southern National Banc. of Virginia, Inc (NASDAQ:SONA). This group of stocks' market caps resemble KPTI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JMEI,3,10350,0 LPG,9,71357,2 GSM,11,42976,-3 SONA,8,19342,0 Average,7.75,36006,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $104 million in KPTI's case. Ferroglobe PLC (NASDAQ:GSM) is the most popular stock in this table. On the other hand Jumei International Holding Ltd (NYSE:JMEI) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Karyopharm Therapeutics Inc (NASDAQ:KPTI) is more popular among hedge funds. 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 KPTI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KPTI were disappointed as the stock returned 1.7% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.