"October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being '08 and the Crash of '87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the '87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March '09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher." This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
MorphoSys AG (NASDAQ:MOR) has experienced an increase in activity from the world's largest hedge funds lately. MOR was in 9 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 5 hedge funds in our database with MOR positions at the end of the previous quarter. Our calculations also showed that mor isn't among the 30 most popular stocks among hedge funds.
In the eyes of most market participants, hedge funds are assumed to be slow, outdated financial tools of yesteryear. While there are over 8000 funds with their doors open at the moment, Our experts hone in on the leaders of this group, about 750 funds. Most estimates calculate that this group of people manage the lion's share of the smart money's total asset base, and by keeping an eye on their best picks, Insider Monkey has unearthed a number of investment strategies that have historically surpassed the broader indices. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let's review the latest hedge fund action regarding MorphoSys AG (NASDAQ:MOR).
How are hedge funds trading MorphoSys AG (NASDAQ:MOR)?
Heading into the first quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 80% from the second quarter of 2018. On the other hand, there were a total of 0 hedge funds with a bullish position in MOR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in MorphoSys AG (NASDAQ:MOR) was held by Redmile Group, which reported holding $22.6 million worth of stock at the end of September. It was followed by Deerfield Management with a $15.2 million position. Other investors bullish on the company included Point72 Asset Management, Millennium Management, and Alyeska Investment Group.
As industrywide interest jumped, some big names were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, created the most outsized position in MorphoSys AG (NASDAQ:MOR). Point72 Asset Management had $5.1 million invested in the company at the end of the quarter. Ernest Chow and Jonathan Howe's Sensato Capital Management also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Ken Griffin's Citadel Investment Group, and Marc Schneidman's Aquilo Capital Management.
Let's check out hedge fund activity in other stocks similar to MorphoSys AG (NASDAQ:MOR). These stocks are Vermilion Energy Inc (NYSE:VET), AutoNation, Inc. (NYSE:AN), United Bankshares, Inc. (NASDAQ:UBSI), and ACI Worldwide Inc (NASDAQ:ACIW). All of these stocks' market caps match MOR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VET,7,40542,-2 AN,22,428351,-2 UBSI,10,27685,3 ACIW,21,272938,6 Average,15,192379,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $51 million in MOR's case. AutoNation, Inc. (NYSE:AN) is the most popular stock in this table. On the other hand Vermilion Energy Inc (NYSE:VET) is the least popular one with only 7 bullish hedge fund positions. MorphoSys AG (NASDAQ:MOR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately MOR wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); MOR investors were disappointed as the stock returned -5.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.