At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Oyster Point Pharma, Inc. (NASDAQ:OYST).
Is Oyster Point Pharma, Inc. (NASDAQ:OYST) worth your attention right now? Hedge funds are in a bullish mood. The number of long hedge fund bets went up by 1 lately. Our calculations also showed that OYST isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: 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 S&P 500 ETFs by more than 44 percentage points since March 2017 (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 stocks that are in our short portfolio.
[caption id="attachment_746825" align="aligncenter" width="386"] Matthew Halbower of Pentwater Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the latest hedge fund action regarding Oyster Point Pharma, Inc. (NASDAQ:OYST).
How have hedgies been trading Oyster Point Pharma, Inc. (NASDAQ:OYST)?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in OYST a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Matthew Halbower's Pentwater Capital Management has the largest position in Oyster Point Pharma, Inc. (NASDAQ:OYST), worth close to $0.7 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish include Israel Englander's Millennium Management, John Overdeck and David Siegel's Two Sigma Advisors and . In terms of the portfolio weights assigned to each position Pentwater Capital Management allocated the biggest weight to Oyster Point Pharma, Inc. (NASDAQ:OYST), around 0.01% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, designating 0.0008 percent of its 13F equity portfolio to OYST.
As aggregate interest increased, key money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Oyster Point Pharma, Inc. (NASDAQ:OYST). Citadel Investment Group had $0.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $0.2 million investment in the stock during the quarter.
Let's check out hedge fund activity in other stocks similar to Oyster Point Pharma, Inc. (NASDAQ:OYST). We will take a look at Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT), Berkshire Hills Bancorp, Inc. (NYSE:BHLB), National Bank Holdings Corp (NYSE:NBHC), and I-Mab (NASDAQ:IMAB). This group of stocks' market values are similar to OYST's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PHAT,6,311386,-1 BHLB,15,23209,6 NBHC,8,47803,-1 IMAB,4,19613,4 Average,8.25,100503,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $2 million in OYST's case. Berkshire Hills Bancorp, Inc. (NYSE:BHLB) is the most popular stock in this table. On the other hand I-Mab (NASDAQ:IMAB) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Oyster Point Pharma, Inc. (NASDAQ:OYST) is even less popular than IMAB. Hedge funds dodged a bullet by taking a bearish stance towards OYST. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately OYST wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); OYST investors were disappointed as the stock returned -18.7% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.