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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT).
Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. PHAT investors should pay attention to an increase in enthusiasm from smart money lately. There were 5 hedge funds in our database with PHAT positions at the end of the second quarter. Our calculations also showed that PHAT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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Peter Kolchinsky of RA Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a peek at the latest hedge fund action encompassing Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT).
What does smart money think about Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT)?
At third quarter's end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in PHAT a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Frazier Healthcare Partners held the most valuable stake in Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT), which was worth $213.7 million at the end of the third quarter. On the second spot was RA Capital Management which amassed $140.3 million worth of shares. Biotechnology Value Fund / BVF Inc, Greenspring Associates, and Athanor Capital 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 Frazier Healthcare Partners allocated the biggest weight to Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT), around 19.18% of its 13F portfolio. Greenspring Associates is also relatively very bullish on the stock, designating 13.17 percent of its 13F equity portfolio to PHAT.
As aggregate interest increased, key money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the most valuable position in Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) but similarly valued. These stocks are Theravance Biopharma Inc (NASDAQ:TBPH), Accel Entertainment, Inc. (NYSE:ACEL), Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), SecureWorks Corp. (NASDAQ:SCWX), Hope Bancorp, Inc. (NASDAQ:HOPE), The E.W. Scripps Company (NASDAQ:SSP), and Heska Corp (NASDAQ:HSKA). This group of stocks' market values resemble PHAT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TBPH,17,291643,-1 ACEL,19,180025,3 TRHC,9,10137,1 SCWX,12,13864,-1 HOPE,17,53210,-2 SSP,14,97977,0 HSKA,15,155088,1 Average,14.7,114563,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $375 million in PHAT's case. Accel Entertainment, Inc. (NYSE:ACEL) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) is even less popular than TRHC. Our overall hedge fund sentiment score for PHAT is 31.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on PHAT 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on PHAT as the stock returned 17.6% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.