Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Myovant Sciences Ltd. (NYSE:MYOV).
Myovant Sciences Ltd. (NYSE:MYOV) was in 8 hedge funds' portfolios at the end of June. MYOV shareholders have witnessed an increase in hedge fund interest in recent months. There were 6 hedge funds in our database with MYOV positions at the end of the previous quarter. Our calculations also showed that MYOV isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
n addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now we're going to take a peek at the new hedge fund action surrounding Myovant Sciences Ltd. (NYSE:MYOV).
How are hedge funds trading Myovant Sciences Ltd. (NYSE:MYOV)?
Heading into the third quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MYOV over the last 16 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, RA Capital Management, managed by Peter Kolchinsky, holds the largest position in Myovant Sciences Ltd. (NYSE:MYOV). RA Capital Management has a $59.2 million position in the stock, comprising 3.2% of its 13F portfolio. On RA Capital Management's heels is Point72 Asset Management, led by Steve Cohen, holding a $7.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions consist of Israel Englander's Millennium Management, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management and Kerr Neilson's Platinum Asset Management.
As aggregate interest increased, specific money managers were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in Myovant Sciences Ltd. (NYSE:MYOV). Point72 Asset Management had $7.7 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $1.8 million investment in the stock during the quarter. The other funds with brand new MYOV positions are John Overdeck and David Siegel's Two Sigma Advisors and Renaissance Technologies.
Let's go over hedge fund activity in other stocks similar to Myovant Sciences Ltd. (NYSE:MYOV). These stocks are Enova International Inc (NYSE:ENVA), Boingo Wireless Inc (NASDAQ:WIFI), Central Securities Corporation (NYSE:CET), and Cooper-Standard Holdings Inc (NYSE:CPS). All of these stocks' market caps resemble MYOV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ENVA,20,153666,0 WIFI,14,94487,-3 CET,2,11334,-1 CPS,15,42030,0 Average,12.75,75379,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $80 million in MYOV's case. Enova International Inc (NYSE:ENVA) is the most popular stock in this table. On the other hand Central Securities Corporation (NYSE:CET) is the least popular one with only 2 bullish hedge fund positions. Myovant Sciences Ltd. (NYSE:MYOV) is not the least popular stock in this group but hedge fund interest is still below average. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MYOV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MYOV investors were disappointed as the stock returned -42.5% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.