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Karyopharm Therapeutics Inc (KPTI): Hedge Funds Taking Some Chips Off The Table

Abigail Fisher

In this article you are going to find out whether hedge funds think Karyopharm Therapeutics Inc (NASDAQ:KPTI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Karyopharm Therapeutics Inc (NASDAQ:KPTI) a cheap stock to buy now? Hedge funds are in a bearish mood. The number of long hedge fund bets were cut by 3 lately. Our calculations also showed that KPTI isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_758402" align="aligncenter" width="396"] William Leland Edwards of Palo Alto Investors[/caption]

William Leland Edwards of Palo Alto Investors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to check out the fresh hedge fund action regarding Karyopharm Therapeutics Inc (NASDAQ:KPTI).

Hedge fund activity in Karyopharm Therapeutics Inc (NASDAQ:KPTI)

At Q1's end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2019. On the other hand, there were a total of 15 hedge funds with a bullish position in KPTI a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Karyopharm Therapeutics Inc (NASDAQ:KPTI) was held by Consonance Capital Management, which reported holding $137.9 million worth of stock at the end of September. It was followed by Avoro Capital Advisors (venBio Select Advisor) with a $134.5 million position. Other investors bullish on the company included Palo Alto Investors, Adage Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Karyopharm Therapeutics Inc (NASDAQ:KPTI), around 10.27% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, dishing out 6.92 percent of its 13F equity portfolio to KPTI.

Seeing as Karyopharm Therapeutics Inc (NASDAQ:KPTI) has witnessed falling interest from hedge fund managers, logic holds that there exists a select few hedge funds that decided to sell off their entire stakes by the end of the first quarter. At the top of the heap, Samuel Isaly's OrbiMed Advisors said goodbye to the largest position of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $11.9 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $5.6 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the first quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Karyopharm Therapeutics Inc (NASDAQ:KPTI) but similarly valued. We will take a look at EVO Payments, Inc. (NASDAQ:EVOP), Minerals Technologies Inc (NYSE:MTX), Walker & Dunlop Inc. (NYSE:WD), and MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI). All of these stocks' market caps are similar to KPTI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EVOP,10,32684,-12 MTX,16,67403,2 WD,19,53136,-6 MTSI,16,153392,-2 Average,15.25,76654,-4.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $617 million in KPTI's case. Walker & Dunlop Inc. (NYSE:WD) is the most popular stock in this table. On the other hand EVO Payments, Inc. (NASDAQ:EVOP) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Karyopharm Therapeutics Inc (NASDAQ:KPTI) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. Unfortunately KPTI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on KPTI were disappointed as the stock returned -3.7% during the second quarter (through June 17th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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