While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Neon Therapeutics, Inc. (NASDAQ:NTGN).
Neon Therapeutics, Inc. (NASDAQ:NTGN) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare NTGN to other stocks including Cell Therapeutics Inc (NASDAQ:CTIC), Bellicum Pharmaceuticals Inc (NASDAQ:BLCM), and Beyond Air, Inc. (NASDAQ:XAIR) 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.
At the moment there are a multitude of gauges stock market investors put to use to value publicly traded companies. A couple of the most underrated gauges are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the top money managers can outperform the S&P 500 by a significant margin (see the details here).
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 as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's review the key hedge fund action surrounding Neon Therapeutics, Inc. (NASDAQ:NTGN).
What have hedge funds been doing with Neon Therapeutics, Inc. (NASDAQ:NTGN)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in NTGN 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.
More specifically, Harvard Management Co was the largest shareholder of Neon Therapeutics, Inc. (NASDAQ:NTGN), with a stake worth $0.9 million reported as of the end of September. Trailing Harvard Management Co was Endurant Capital Management, which amassed a stake valued at $0.3 million. Renaissance Technologies, Hillhouse Capital Management, and Millennium Management 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 Endurant Capital Management allocated the biggest weight to Neon Therapeutics, Inc. (NASDAQ:NTGN), around 0.1% of its 13F portfolio. Harvard Management Co is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to NTGN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Partner Fund Management. 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 Millennium Management).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Neon Therapeutics, Inc. (NASDAQ:NTGN) but similarly valued. These stocks are Cell Therapeutics Inc (NASDAQ:CTIC), Bellicum Pharmaceuticals Inc (NASDAQ:BLCM), Beyond Air, Inc. (NASDAQ:XAIR), and Vascular Biogenics Ltd. (NASDAQ:VBLT). This group of stocks' market caps are similar to NTGN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTIC,8,11996,1 BLCM,12,8619,1 XAIR,3,2211,1 VBLT,3,217,0 Average,6.5,5761,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $2 million in NTGN's case. Bellicum Pharmaceuticals Inc (NASDAQ:BLCM) is the most popular stock in this table. On the other hand Beyond Air, Inc. (NASDAQ:XAIR) is the least popular one with only 3 bullish hedge fund positions. Neon Therapeutics, Inc. (NASDAQ:NTGN) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NTGN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NTGN investors were disappointed as the stock returned -33.7% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.