The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Principia Biopharma Inc. (NASDAQ:PRNB).
Is Principia Biopharma Inc. (NASDAQ:PRNB) a splendid stock to buy now? Hedge funds are getting more bullish. The number of bullish hedge fund bets moved up by 1 lately. Our calculations also showed that PRNB 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.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a peek at the key hedge fund action surrounding Principia Biopharma Inc. (NASDAQ:PRNB).
How are hedge funds trading Principia Biopharma Inc. (NASDAQ:PRNB)?
At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in PRNB a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Principia Biopharma Inc. (NASDAQ:PRNB) was held by Baker Bros. Advisors, which reported holding $59.3 million worth of stock at the end of March. It was followed by OrbiMed Advisors with a $53.3 million position. Other investors bullish on the company included Cormorant Asset Management, Partner Fund Management, and Adage Capital Management.
Consequently, specific money managers were breaking ground themselves. Partner Fund Management, managed by Christopher James, created the most outsized position in Principia Biopharma Inc. (NASDAQ:PRNB). Partner Fund Management had $19.7 million invested in the company at the end of the quarter. Jeremy Green's Redmile Group also made a $8.1 million investment in the stock during the quarter. The other funds with brand new PRNB positions are Steve Cohen's Point72 Asset Management and Renaissance Technologies.
Let's also examine hedge fund activity in other stocks similar to Principia Biopharma Inc. (NASDAQ:PRNB). These stocks are Bluegreen Vacations Corporation (NYSE:BXG), Casa Therapeutics Inc (NASDAQ:CARA), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), and ZIOPHARM Oncology Inc. (NASDAQ:ZIOP). This group of stocks' market valuations are closest to PRNB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BXG,6,29100,0 CARA,8,38902,0 DCPH,15,234197,-2 ZIOP,12,141596,6 Average,10.25,110949,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $226 million in PRNB's case. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is the most popular stock in this table. On the other hand Bluegreen Vacations Corporation (NYSE:BXG) is the least popular one with only 6 bullish hedge fund positions. Principia Biopharma Inc. (NASDAQ:PRNB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 PRNB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PRNB were disappointed as the stock returned -14.9% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.