How do we determine whether Theravance Biopharma Inc (NASDAQ:TBPH) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Theravance Biopharma Inc (NASDAQ:TBPH) was in 8 hedge funds' portfolios at the end of December. TBPH shareholders have witnessed a decrease in enthusiasm from smart money in recent months. There were 11 hedge funds in our database with TBPH holdings at the end of the previous quarter. Our calculations also showed that TBPH 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 32 percentage points since May 2014 through March 12, 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.
We're going to review the key hedge fund action surrounding Theravance Biopharma Inc (NASDAQ:TBPH).
What does the smart money think about Theravance Biopharma Inc (NASDAQ:TBPH)?
At Q4's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TBPH over the last 14 quarters. So, let's see 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, Neil Woodford's Woodford Investment Management has the most valuable position in Theravance Biopharma Inc (NASDAQ:TBPH), worth close to $315.2 million, comprising 27.3% of its total 13F portfolio. On Woodford Investment Management's heels is Baupost Group, managed by Seth Klarman, which holds a $238.2 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Bihua Chen's Cormorant Asset Management, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management and Chuck Royce's Royce & Associates.
Seeing as Theravance Biopharma Inc (NASDAQ:TBPH) has witnessed falling interest from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedge funds who sold off their positions entirely last quarter. It's worth mentioning that Mitchell Blutt's Consonance Capital Management cut the biggest stake of the 700 funds monitored by Insider Monkey, worth close to $23.9 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund said goodbye to about $4.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Theravance Biopharma Inc (NASDAQ:TBPH) but similarly valued. These stocks are Newmark Group, Inc. (NASDAQ:NMRK), Waddell & Reed Financial, Inc. (NYSE:WDR), American Finance Trust, Inc. (NASDAQ:AFIN), and The Medicines Company (NASDAQ:MDCO). This group of stocks' market values resemble TBPH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NMRK,21,126737,4 WDR,16,91430,-1 AFIN,3,1143,1 MDCO,20,423473,-6 Average,15,160696,-0.5 [/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 $161 million. That figure was $595 million in TBPH's case. Newmark Group, Inc. (NASDAQ:NMRK) is the most popular stock in this table. On the other hand American Finance Trust, Inc. (NASDAQ:AFIN) is the least popular one with only 3 bullish hedge fund positions. Theravance Biopharma Inc (NASDAQ:TBPH) 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 TBPH wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); TBPH investors were disappointed as the stock returned -10.3% 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.