Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about InMed Pharmaceuticals Inc. (NASDAQ:INM) in this article.
Is INM a good stock to buy now? Money managers were becoming hopeful. The number of bullish hedge fund bets moved up by 3 in recent months. InMed Pharmaceuticals Inc. (NASDAQ:INM) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that INM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
Sander Gerber of Hudson Bay Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to analyze the fresh hedge fund action surrounding InMed Pharmaceuticals Inc. (NASDAQ:INM).
Do Hedge Funds Think INM Is A Good Stock To Buy Now?
At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3 from the fourth quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in INM a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Armistice Capital, managed by Steven Boyd, holds the number one position in InMed Pharmaceuticals Inc. (NASDAQ:INM). Armistice Capital has a $0.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Hudson Bay Capital Management, managed by Sander Gerber, which holds a $0.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Armistice Capital allocated the biggest weight to InMed Pharmaceuticals Inc. (NASDAQ:INM), around 0.02% of its 13F portfolio. Hudson Bay Capital Management is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to INM.
As one would reasonably expect, key hedge funds have been driving this bullishness. Armistice Capital, managed by Steven Boyd, created the largest position in InMed Pharmaceuticals Inc. (NASDAQ:INM). Armistice Capital had $0.8 million invested in the company at the end of the quarter. Sander Gerber's Hudson Bay Capital Management also initiated a $0.5 million position during the quarter. The only other fund with a brand new INM position is Ken Griffin's Citadel Investment Group.
Let's now take a look at hedge fund activity in other stocks similar to InMed Pharmaceuticals Inc. (NASDAQ:INM). We will take a look at Benitec Biopharma Inc. (NASDAQ:BNTC), Superior Drilling Products, Inc. (NYSE:SDPI), SigmaTron International, Inc. (NASDAQ:SGMA), Gyrodyne, LLC (NASDAQ:GYRO), Millendo Therapeutics, Inc. (NASDAQ:MLND), FG Financial Group, Inc. (NASDAQ:FGF), and CynergisTek, Inc. (NYSE:CTEK). This group of stocks' market caps resemble INM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BNTC,2,181,-1 SDPI,2,214,1 SGMA,2,1749,1 GYRO,1,1314,0 MLND,6,3734,-3 FGF,2,584,1 CTEK,4,577,1 Average,2.7,1193,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.7 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in INM's case. Millendo Therapeutics, Inc. (NASDAQ:MLND) is the most popular stock in this table. On the other hand Gyrodyne, LLC (NASDAQ:GYRO) is the least popular one with only 1 bullish hedge fund positions. InMed Pharmaceuticals Inc. (NASDAQ:INM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INM is 40. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately INM wasn't nearly as popular as these 5 stocks and hedge funds that were betting on INM were disappointed as the stock returned -13.9% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.