- Oops!Something went wrong.Please try again later.
In this article we are going to use hedge fund sentiment as a tool and determine whether Inovio Pharmaceuticals Inc (NYSE:INO) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is INO a good stock to buy now? Inovio Pharmaceuticals Inc (NYSE:INO) shareholders have witnessed an increase in enthusiasm from smart money recently. Inovio Pharmaceuticals Inc (NYSE:INO) was in 16 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that INO 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.
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 S&P 500 ETFs by more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Philippe Laffont of Coatue 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. Now we're going to take a gander at the new hedge fund action encompassing Inovio Pharmaceuticals Inc (NYSE:INO).
Do Hedge Funds Think INO Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in INO a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Inovio Pharmaceuticals Inc (NYSE:INO) was held by Coatue Management, which reported holding $41.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $18.6 million position. Other investors bullish on the company included Adage Capital Management, Citadel Investment Group, and Taconic Capital. In terms of the portfolio weights assigned to each position Coatue Management allocated the biggest weight to Inovio Pharmaceuticals Inc (NYSE:INO), around 0.22% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, designating 0.22 percent of its 13F equity portfolio to INO.
With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the largest position in Inovio Pharmaceuticals Inc (NYSE:INO). Adage Capital Management had $5.8 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $4.7 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Karim Abbadi and Edward McBride's Centiva Capital, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Inovio Pharmaceuticals Inc (NYSE:INO) but similarly valued. These stocks are Moelis & Company (NYSE:MC), Associated Banc Corp (NYSE:ASB), Integer Holdings Corporation (NYSE:ITGR), South Jersey Industries Inc (NYSE:SJI), Medifast, Inc. (NYSE:MED), Brinker International, Inc. (NYSE:EAT), and Visteon Corp (NYSE:VC). This group of stocks' market caps resemble INO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MC,13,68166,5 ASB,21,177092,-1 ITGR,22,145970,5 SJI,13,80266,-1 MED,21,316364,3 EAT,35,437585,8 VC,28,319170,5 Average,21.9,220659,3.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $221 million. That figure was $67 million in INO's case. Brinker International, Inc. (NYSE:EAT) is the most popular stock in this table. On the other hand Moelis & Company (NYSE:MC) is the least popular one with only 13 bullish hedge fund positions. Inovio Pharmaceuticals Inc (NYSE:INO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INO is 43.8. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 December 14th and surpassed the market again by 15.8 percentage points. Unfortunately INO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); INO investors were disappointed as the stock returned -10.3% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Get real-time email alerts: Follow Inovio Pharmaceuticals Inc. (NASDAQ:INO)
Disclosure: None. This article was originally published at Insider Monkey.