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The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Mersana Therapeutics, Inc. (NASDAQ:MRSN).
Is MRSN stock a buy? Hedge funds were in an optimistic mood. The number of bullish hedge fund bets advanced by 2 lately. Mersana Therapeutics, Inc. (NASDAQ:MRSN) was in 30 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MRSN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 28 hedge funds in our database with MRSN positions at the end of the third quarter.
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 124 percentage points since March 2017 (see the details here).
Alex Denner of Sarissa Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. With all of this in mind let's analyze the latest hedge fund action surrounding Mersana Therapeutics, Inc. (NASDAQ:MRSN).
Do Hedge Funds Think MRSN Is A Good Stock To Buy Now?
At Q4's end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in MRSN over the last 22 quarters. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Mersana Therapeutics, Inc. (NASDAQ:MRSN) was held by Avoro Capital Advisors (venBio Select Advisor), which reported holding $180.9 million worth of stock at the end of December. It was followed by Sarissa Capital Management with a $77.9 million position. Other investors bullish on the company included Rock Springs Capital Management, Citadel Investment Group, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Mersana Therapeutics, Inc. (NASDAQ:MRSN), around 7.95% of its 13F portfolio. Acuta Capital Partners is also relatively very bullish on the stock, dishing out 5.03 percent of its 13F equity portfolio to MRSN.
Now, key hedge funds were leading the bulls' herd. Great Point Partners, managed by Jeffrey Jay and David Kroin, created the most valuable position in Mersana Therapeutics, Inc. (NASDAQ:MRSN). Great Point Partners had $13 million invested in the company at the end of the quarter. Prashanth Jayaram's Tri Locum Partners also made a $7.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Egen Atkinson and Michael Kramarz's Commodore Capital, Neil Shahrestani's Ikarian Capital, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's check out hedge fund activity in other stocks similar to Mersana Therapeutics, Inc. (NASDAQ:MRSN). These stocks are First Midwest Bancorp Inc (NASDAQ:FMBI), EnLink Midstream LLC (NYSE:ENLC), PRA Group, Inc. (NASDAQ:PRAA), Enviva Partners, LP (NYSE:EVA), Piper Sandler Companies (NYSE:PIPR), Vector Group Ltd (NYSE:VGR), and B&G Foods, Inc. (NYSE:BGS). This group of stocks' market valuations are similar to MRSN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FMBI,16,82001,-1 ENLC,8,28595,-1 PRAA,13,40438,-6 EVA,9,252307,3 PIPR,12,50615,-2 VGR,14,143089,-3 BGS,15,57239,0 Average,12.4,93469,-1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.4 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $618 million in MRSN's case. First Midwest Bancorp Inc (NASDAQ:FMBI) is the most popular stock in this table. On the other hand EnLink Midstream LLC (NYSE:ENLC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Mersana Therapeutics, Inc. (NASDAQ:MRSN) is more popular among hedge funds. Our overall hedge fund sentiment score for MRSN is 87. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Unfortunately MRSN wasn't nearly as popular as these 30 stocks and hedge funds that were betting on MRSN were disappointed as the stock returned -40.4% since the end of the fourth quarter (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.