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 Melvin Capital's recent GameStop 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 Protagonist Therapeutics, Inc. (NASDAQ:PTGX).
Protagonist Therapeutics, Inc. (NASDAQ:PTGX) investors should be aware of a decrease in enthusiasm from smart money in recent months. Protagonist Therapeutics, Inc. (NASDAQ:PTGX) was in 20 hedge funds' portfolios at the end of March. The all time high for this statistic is 23. There were 23 hedge funds in our database with PTGX holdings at the end of December. Our calculations also showed that PTGX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Felix Baker of Baker Bros.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a gander at the latest hedge fund action regarding Protagonist Therapeutics, Inc. (NASDAQ:PTGX).
Do Hedge Funds Think PTGX Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PTGX over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Protagonist Therapeutics, Inc. (NASDAQ:PTGX) was held by Biotechnology Value Fund / BVF Inc, which reported holding $102.6 million worth of stock at the end of December. It was followed by Consonance Capital Management with a $70.2 million position. Other investors bullish on the company included Farallon Capital, Baker Bros. Advisors, and Deerfield Management. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Protagonist Therapeutics, Inc. (NASDAQ:PTGX), around 7.48% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, earmarking 3.84 percent of its 13F equity portfolio to PTGX.
Because Protagonist Therapeutics, Inc. (NASDAQ:PTGX) has witnessed bearish sentiment from hedge fund managers, logic holds that there is a sect of funds that decided to sell off their full holdings last quarter. Intriguingly, Joseph Edelman's Perceptive Advisors sold off the largest position of the 750 funds followed by Insider Monkey, worth an estimated $4.1 million in stock, and Renaissance Technologies was right behind this move, as the fund dumped about $0.7 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Protagonist Therapeutics, Inc. (NASDAQ:PTGX) but similarly valued. These stocks are Agilysys, Inc. (NASDAQ:AGYS), Meridian Bioscience, Inc. (NASDAQ:VIVO), GreenSky, Inc. (NASDAQ:GSKY), MTS Systems Corporation (NASDAQ:MTSC), Repare Therapeutics Inc. (NASDAQ:RPTX), 111, Inc. (NASDAQ:YI), and Rite Aid Corporation (NYSE:RAD). This group of stocks' market values match PTGX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGYS,13,335316,-4 VIVO,16,123358,-2 GSKY,11,36914,-3 MTSC,17,106391,1 RPTX,18,427184,0 YI,4,5158,-1 RAD,16,82115,2 Average,13.6,159491,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $400 million in PTGX's case. Repare Therapeutics Inc. (NASDAQ:RPTX) is the most popular stock in this table. On the other hand 111, Inc. (NASDAQ:YI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Protagonist Therapeutics, Inc. (NASDAQ:PTGX) is more popular among hedge funds. Our overall hedge fund sentiment score for PTGX is 78.1. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 23.8% in 2021 through July 16th but still managed to beat the market by 7.7 percentage points. Hedge funds were also right about betting on PTGX as the stock returned 76.9% since the end of March (through 7/16) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.