The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Karyopharm Therapeutics Inc (NASDAQ:KPTI).
Is KPTI a good stock to buy now? Hedge fund interest in Karyopharm Therapeutics Inc (NASDAQ:KPTI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that KPTI 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as PC Connection, Inc. (NASDAQ:CNXN), Micro Focus Intl PLC (NYSE:MFGP), and Sturm, Ruger & Company, Inc. (NYSE:RGR) to gather more data points. 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 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 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.
William Leland Edwards of Palo Alto Investors
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 review the recent hedge fund action encompassing Karyopharm Therapeutics Inc (NASDAQ:KPTI).
Do Hedge Funds Think KPTI Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in KPTI over the last 21 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Avoro Capital Advisors (venBio Select Advisor) was the largest shareholder of Karyopharm Therapeutics Inc (NASDAQ:KPTI), with a stake worth $87.6 million reported as of the end of September. Trailing Avoro Capital Advisors (venBio Select Advisor) was Palo Alto Investors, which amassed a stake valued at $74.3 million. Adage Capital Management, D E Shaw, and Alkeon Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to Karyopharm Therapeutics Inc (NASDAQ:KPTI), around 4.08% of its 13F portfolio. Birchview Capital is also relatively very bullish on the stock, designating 1.64 percent of its 13F equity portfolio to KPTI.
Because Karyopharm Therapeutics Inc (NASDAQ:KPTI) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of funds that elected to cut their positions entirely last quarter. At the top of the heap, Mitchell Blutt's Consonance Capital Management sold off the biggest stake of the 750 funds watched by Insider Monkey, valued at about $123 million in stock. Farallon Capital, also sold off its stock, about $25.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Karyopharm Therapeutics Inc (NASDAQ:KPTI) but similarly valued. These stocks are PC Connection, Inc. (NASDAQ:CNXN), Micro Focus Intl PLC (NYSE:MFGP), Sturm, Ruger & Company, Inc. (NYSE:RGR), Methode Electronics Inc. (NYSE:MEI), The Liberty Braves Group (NASDAQ:BATRA), Akero Therapeutics, Inc. (NASDAQ:AKRO), and Gol Linhas Aereas Inteligentes SA (NYSE:GOL). This group of stocks' market caps resemble KPTI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNXN,4,30286,-4 MFGP,10,18863,-3 RGR,24,181471,-3 MEI,11,68216,-1 BATRA,12,51207,-1 AKRO,14,269570,1 GOL,10,21967,0 Average,12.1,91654,-1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $326 million in KPTI's case. Sturm, Ruger & Company, Inc. (NYSE:RGR) is the most popular stock in this table. On the other hand PC Connection, Inc. (NASDAQ:CNXN) is the least popular one with only 4 bullish hedge fund positions. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KPTI is 73.8. 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 positive signal but 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 beat the market again by 15.8 percentage points. Unfortunately KPTI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KPTI were disappointed as the stock returned 6.6% 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.