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We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) based on that data.
Is MDGL a good stock to buy now? Hedge fund interest in Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MDGL 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 Sanmina Corporation (NASDAQ:SANM), Rogers Corporation (NYSE:ROG), and Prestige Consumer Healthcare Inc. (NYSE:PBH) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are tons of signals stock traders can use to value their stock investments. A pair of the most under-the-radar signals are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the S&P 500 by a solid margin (see the details here).
Arthur B Cohen and Joseph Healey of Healthcor Management LP
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. Keeping this in mind we're going to take a gander at the fresh hedge fund action regarding Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL).
Do Hedge Funds Think MDGL Is A Good Stock To Buy Now?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in MDGL a year ago. So, let's see 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, Julian Baker and Felix Baker's Baker Bros. Advisors has the number one position in Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), worth close to $178 million, accounting for 0.7% of its total 13F portfolio. On Baker Bros. Advisors's heels is Arthur B Cohen and Joseph Healey of Healthcor Management LP, with a $134.2 million position; the fund has 5.4% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise Behzad Aghazadeh's Avoro Capital Advisors (venBio Select Advisor), Steven Boyd's Armistice Capital and Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Healthcor Management LP allocated the biggest weight to Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), around 5.37% of its 13F portfolio. Avoro Capital Advisors (venBio Select Advisor) is also relatively very bullish on the stock, setting aside 1.5 percent of its 13F equity portfolio to MDGL.
Due to the fact that Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who sold off their entire stakes by the end of the third quarter. At the top of the heap, David Harding's Winton Capital Management cut the biggest position of the 750 funds followed by Insider Monkey, comprising an estimated $1.3 million in stock, and Minhua Zhang's Weld Capital Management was right behind this move, as the fund dropped about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL). We will take a look at Sanmina Corporation (NASDAQ:SANM), Rogers Corporation (NYSE:ROG), Prestige Consumer Healthcare Inc. (NYSE:PBH), GrafTech International Ltd. (NYSE:EAF), TC Pipelines, LP (NYSE:TCP), Cubic Corporation (NYSE:CUB), and PRA Group, Inc. (NASDAQ:PRAA). This group of stocks' market values are similar to MDGL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SANM,15,135028,-5 ROG,19,94135,6 PBH,17,110462,-3 EAF,26,145437,2 TCP,3,2859,1 CUB,19,118395,6 PRAA,19,70189,6 Average,16.9,96644,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $508 million in MDGL's case. GrafTech International Ltd. (NYSE:EAF) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 3 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 overall hedge fund sentiment score for MDGL is 48.4. 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 MDGL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MDGL investors were disappointed as the stock returned 1.7% 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.
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Disclosure: None. This article was originally published at Insider Monkey.