Madrigal Pharmaceuticals, Inc. (MDGL): Hedge Fund Sentiment Unchanged
We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL).
Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare MDGL to other stocks including Osisko Gold Royalties Ltd (NYSE:OR), Covetrus, Inc. (NASDAQ:CVET), and Herc Holdings Inc. (NYSE:HRI) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are perceived as worthless, old investment tools of the past. While there are over 8000 funds in operation at present, We look at the leaders of this club, around 750 funds. These hedge fund managers orchestrate most of all hedge funds' total capital, and by observing their best stock picks, Insider Monkey has unsheathed a number of investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_262340" align="aligncenter" width="500"]
Arthur B Cohen and Joseph Healey of Healthcor Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's view the new hedge fund action regarding Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL).
How have hedgies been trading Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL)?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MDGL over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Julian Baker and Felix Baker's Baker Bros. Advisors has the largest position in Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), worth close to $100.8 million, corresponding to 0.7% of its total 13F portfolio. The second largest stake is held by Healthcor Management, managed by Arthur B Cohen and Joseph Healey, which holds a $88.9 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Behzad Aghazadeh's venBio Select Advisor, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management and Steven Boyd's Armistice Capital. In terms of the portfolio weights assigned to each position Healthcor Management allocated the biggest weight to Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), around 3.36% of its 13F portfolio. venBio Select Advisor is also relatively very bullish on the stock, setting aside 1.29 percent of its 13F equity portfolio to MDGL.
Due to the fact that Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) has experienced a decline in interest from the aggregate hedge fund industry, it's easy to see that there is a sect of hedge funds who sold off their entire stakes in the third quarter. At the top of the heap, Ori Hershkovitz's Nexthera Capital cut the biggest position of the 750 funds tracked by Insider Monkey, valued at about $1.6 million in stock, and Michael S. Weiss and Lindsay A. Rosenwald's Opus Point Partners Management was right behind this move, as the fund dropped about $0.4 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL). These stocks are Osisko Gold Royalties Ltd (NYSE:OR), Covetrus, Inc. (NASDAQ:CVET), Herc Holdings Inc. (NYSE:HRI), and Getty Realty Corp. (NYSE:GTY). This group of stocks' market caps resemble MDGL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OR,13,42365,1 CVET,21,140444,1 HRI,26,565982,4 GTY,9,92245,-1 Average,17.25,210259,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $264 million in MDGL's case. Herc Holdings Inc. (NYSE:HRI) is the most popular stock in this table. On the other hand Getty Realty Corp. (NYSE:GTY) is the least popular one with only 9 bullish hedge fund positions. Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on MDGL as the stock returned 28.4% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
Related Content
