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Mustang Bio, Inc. (MBIO): Hedge Funds In Wait-and-See Mode

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  • MBIO

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Mustang Bio, Inc. (NASDAQ:MBIO) based on those filings.

Hedge fund interest in Mustang Bio, Inc. (NASDAQ:MBIO) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MBIO isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). 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 Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), Mistras Group, Inc. (NYSE:MG), and Red Violet, Inc. (NASDAQ:RDVT) to gather more data points.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's analyze the fresh hedge fund action surrounding Mustang Bio, Inc. (NASDAQ:MBIO).

Do Hedge Funds Think MBIO Is A Good Stock To Buy Now?

At the end of June, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MBIO over the last 24 quarters. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is MBIO A Good Stock To Buy?
Is MBIO A Good Stock To Buy?

Among these funds, Two Sigma Advisors held the most valuable stake in Mustang Bio, Inc. (NASDAQ:MBIO), which was worth $4.8 million at the end of the second quarter. On the second spot was Millennium Management which amassed $2.2 million worth of shares. Ikarian Capital, Citadel Investment Group, and D E Shaw 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 Ikarian Capital allocated the biggest weight to Mustang Bio, Inc. (NASDAQ:MBIO), around 0.14% of its 13F portfolio. Algert Global is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to MBIO.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: GLG Partners. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was D E Shaw).

Let's now review hedge fund activity in other stocks similar to Mustang Bio, Inc. (NASDAQ:MBIO). We will take a look at Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), Mistras Group, Inc. (NYSE:MG), Red Violet, Inc. (NASDAQ:RDVT), Renren Inc (NYSE:RENN), NuStar GP Holdings, LLC (NYSE:NSH), Ciner Resources LP (NYSE:CINR), and Summit Financial Group, Inc. (NASDAQ:SMMF). This group of stocks' market values are closest to MBIO's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EIGR,13,62381,-4 MG,10,32961,-1 RDVT,7,71863,4 RENN,1,2702,-2 NSH,27,104126,6 CINR,1,2581,0 SMMF,4,10135,0 Average,9,40964,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $10 million in MBIO's case. NuStar GP Holdings, LLC (NYSE:NSH) is the most popular stock in this table. On the other hand Renren Inc (NYSE:RENN) is the least popular one with only 1 bullish hedge fund positions. Mustang Bio, Inc. (NASDAQ:MBIO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MBIO is 45.4. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately MBIO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MBIO were disappointed as the stock returned -17.8% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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