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Is NuCana plc (NASDAQ:NCNA) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is NuCana plc (NASDAQ:NCNA) the right pick for your portfolio? Money managers are turning bullish. The number of bullish hedge fund bets inched up by 5 lately. Our calculations also showed that NCNA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Israel Englander of Millennium Management[/caption]
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. Now we're going to take a gander at the key hedge fund action regarding NuCana plc (NASDAQ:NCNA).
Hedge fund activity in NuCana plc (NASDAQ:NCNA)
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 500% from the second quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in NCNA a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Wildcat Capital Management was the largest shareholder of NuCana plc (NASDAQ:NCNA), with a stake worth $3.8 million reported as of the end of September. Trailing Wildcat Capital Management was Tang Capital Management, which amassed a stake valued at $3.6 million. Endurant Capital Management, Millennium Management, and Renaissance Technologies 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 Wildcat Capital Management allocated the biggest weight to NuCana plc (NASDAQ:NCNA), around 1.62% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, earmarking 0.83 percent of its 13F equity portfolio to NCNA.
With a general bullishness amongst the heavyweights, some big names have jumped into NuCana plc (NASDAQ:NCNA) headfirst. Wildcat Capital Management, managed by Leonard A. Potter, initiated the most valuable position in NuCana plc (NASDAQ:NCNA). Wildcat Capital Management had $3.8 million invested in the company at the end of the quarter. Kevin C. Tang's Tang Capital Management also made a $3.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Vishal Saluja and Pham Quang's Endurant Capital Management, Israel Englander's Millennium Management, and Renaissance Technologies.
Let's now review hedge fund activity in other stocks similar to NuCana plc (NASDAQ:NCNA). These stocks are Safeguard Scientifics, Inc (NYSE:SFE), Gravity Co., LTD. (NASDAQ:GRVY), Bioceres Crop Solutions Corp. (NYSE:BIOX), and MVB Financial Corp. (NASDAQ:MVBF). This group of stocks' market values are similar to NCNA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SFE,10,26279,4 GRVY,3,2578,-3 BIOX,3,261,-1 MVBF,4,25454,1 Average,5,13643,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $12 million in NCNA's case. Safeguard Scientifics, Inc (NYSE:SFE) is the most popular stock in this table. On the other hand Gravity Co., LTD. (NASDAQ:GRVY) is the least popular one with only 3 bullish hedge fund positions. NuCana plc (NASDAQ:NCNA) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on NCNA as the stock returned 17.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.