Is Principia Biopharma Inc. (NASDAQ:PRNB) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Principia Biopharma Inc. (NASDAQ:PRNB) investors should pay attention to a decrease in enthusiasm from smart money of late. PRNB was in 11 hedge funds' portfolios at the end of the first quarter of 2019. There were 12 hedge funds in our database with PRNB holdings at the end of the previous quarter. Our calculations also showed that prnb isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to take a gander at the recent hedge fund action regarding Principia Biopharma Inc. (NASDAQ:PRNB).
What have hedge funds been doing with Principia Biopharma Inc. (NASDAQ:PRNB)?
Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in PRNB a year ago. So, let's examine 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 OrbiMed Advisors, which reported holding $88.6 million worth of stock at the end of March. It was followed by Baker Bros. Advisors with a $60.8 million position. Other investors bullish on the company included Cormorant Asset Management, Adage Capital Management, and Samsara BioCapital.
Since Principia Biopharma Inc. (NASDAQ:PRNB) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there were a few money managers who sold off their full holdings last quarter. Interestingly, Thomas Steyer's Farallon Capital cut the largest stake of the 700 funds monitored by Insider Monkey, worth an estimated $9.6 million in stock, and Mark Lampert's Biotechnology Value Fund / BVF Inc was right behind this move, as the fund dropped about $4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Principia Biopharma Inc. (NASDAQ:PRNB). These stocks are Weidai Ltd. (NYSE:WEI), Origin Bancorp, Inc. (NASDAQ:OBNK), Unitil Corporation (NYSE:UTL), and PGT Innovations Inc. (NYSE:PGTI). This group of stocks' market caps are closest to PRNB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WEI,1,521,0 OBNK,4,25101,-1 UTL,10,99429,2 PGTI,21,100534,1 Average,9,56396,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $245 million in PRNB's case. PGT Innovations Inc. (NYSE:PGTI) is the most popular stock in this table. On the other hand Weidai Ltd. (NYSE:WEI) is the least popular one with only 1 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on PRNB, though not to the same extent, as the stock returned 4.6% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.