At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Immunomedics, Inc. (NASDAQ:IMMU) undervalued? Prominent investors are getting less bullish. The number of bullish hedge fund bets were trimmed by 2 recently. Our calculations also showed that immu isn't among the 30 most popular stocks among hedge funds. IMMU was in 28 hedge funds' portfolios at the end of December. There were 30 hedge funds in our database with IMMU positions at the end of the previous quarter.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.
We're going to analyze the fresh hedge fund action encompassing Immunomedics, Inc. (NASDAQ:IMMU).
How are hedge funds trading Immunomedics, Inc. (NASDAQ:IMMU)?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in IMMU a year ago. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, venBio Select Advisor was the largest shareholder of Immunomedics, Inc. (NASDAQ:IMMU), with a stake worth $252.8 million reported as of the end of September. Trailing venBio Select Advisor was Palo Alto Investors, which amassed a stake valued at $74 million. OrbiMed Advisors, RA Capital Management, and Foresite Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Immunomedics, Inc. (NASDAQ:IMMU) has experienced bearish sentiment from hedge fund managers, it's safe to say that there was a specific group of hedgies who sold off their full holdings by the end of the third quarter. Intriguingly, Kenneth Tropin's Graham Capital Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, comprising close to $36.6 million in stock. Jim Simons's fund, Renaissance Technologies, also said goodbye to its stock, about $10.7 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Immunomedics, Inc. (NASDAQ:IMMU) but similarly valued. We will take a look at J&J Snack Foods Corp. (NASDAQ:JJSF), Stag Industrial Inc (NYSE:STAG), Energizer Holdings, Inc. (NYSE:ENR), and Science Applications International Corp (NYSE:SAIC). This group of stocks' market valuations are closest to IMMU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JJSF,10,81856,0 STAG,12,115201,1 ENR,21,242691,-5 SAIC,24,192455,0 Average,16.75,158051,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $680 million in IMMU's case. Science Applications International Corp (NYSE:SAIC) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Immunomedics, Inc. (NASDAQ:IMMU) is more popular among hedge funds. 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. Hedge funds were also right about betting on IMMU, though not to the same extent, as the stock returned 16.7% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.