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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards ObsEva SA (NASDAQ:OBSV).
Is ObsEva SA (OBSV) a good stock to buy now? The smart money was turning less bullish. The number of long hedge fund positions were trimmed by 5 recently. ObsEva SA (NASDAQ:OBSV) was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 13. Our calculations also showed that OBSV isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 11 hedge funds in our database with OBSV positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are tons of formulas market participants can use to analyze publicly traded companies. Some of the most under-the-radar formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top fund managers can outclass their index-focused peers by a significant margin (see the details here).
Kris Jenner of Rock Springs Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now we're going to take a glance at the key hedge fund action encompassing ObsEva SA (NASDAQ:OBSV).
What have hedge funds been doing with ObsEva SA (NASDAQ:OBSV)?
At Q3's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -45% from the second quarter of 2020. By comparison, 8 hedge funds held shares or bullish call options in OBSV a year ago. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Armistice Capital was the largest shareholder of ObsEva SA (NASDAQ:OBSV), with a stake worth $10.8 million reported as of the end of September. Trailing Armistice Capital was Rock Springs Capital Management, which amassed a stake valued at $3.6 million. OrbiMed Advisors, Arrowstreet Capital, 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 Armistice Capital allocated the biggest weight to ObsEva SA (NASDAQ:OBSV), around 0.39% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to OBSV.
Due to the fact that ObsEva SA (NASDAQ:OBSV) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few money managers who were dropping their full holdings in the third quarter. At the top of the heap, Arsani William's Logos Capital sold off the biggest position of the "upper crust" of funds tracked by Insider Monkey, worth close to $6.9 million in stock. Steve Cohen's fund, Point72 Asset Management, also cut its stock, about $1.6 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to ObsEva SA (NASDAQ:OBSV). These stocks are County Bancorp, Inc. (NASDAQ:ICBK), Ardmore Shipping Corp (NYSE:ASC), Catabasis Pharmaceuticals Inc (NASDAQ:CATB), LEAP THERAPEUTICS, INC. (NASDAQ:LPTX), First Guaranty Bancshares, Inc. (NASDAQ:FGBI), Champions Oncology, Inc. (NASDAQ:CSBR), and Laredo Petroleum Inc (NYSE:LPI). This group of stocks' market valuations resemble OBSV's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ICBK,3,3672,-1 ASC,12,12907,0 CATB,6,3401,-2 LPTX,12,34432,-4 FGBI,1,328,-1 CSBR,2,2533,1 LPI,10,9238,-1 Average,6.6,9502,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.6 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $18 million in OBSV's case. Ardmore Shipping Corp (NYSE:ASC) is the most popular stock in this table. On the other hand First Guaranty Bancshares, Inc. (NASDAQ:FGBI) is the least popular one with only 1 bullish hedge fund positions. ObsEva SA (NASDAQ:OBSV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OBSV is 36.6. 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 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately OBSV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); OBSV investors were disappointed as the stock returned -17.3% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.