We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. That's a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is PTC Therapeutics, Inc. (NASDAQ:PTCT) a bargain? Money managers are getting less bullish. The number of long hedge fund bets were cut by 3 in recent months. Our calculations also showed that PTCT isn't among the 30 most popular stocks among hedge funds (view the video below). PTCT was in 28 hedge funds' portfolios at the end of June. There were 31 hedge funds in our database with PTCT positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are tons of formulas shareholders have at their disposal to size up their stock investments. Two of the less utilized formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outpace their index-focused peers by a healthy margin (see the details here).
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. Let's review the key hedge fund action surrounding PTC Therapeutics, Inc. (NASDAQ:PTCT).
How have hedgies been trading PTC Therapeutics, Inc. (NASDAQ:PTCT)?
At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PTCT over the last 16 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Point72 Asset Management held the most valuable stake in PTC Therapeutics, Inc. (NASDAQ:PTCT), which was worth $119.4 million at the end of the second quarter. On the second spot was OrbiMed Advisors which amassed $94 million worth of shares. Moreover, Great Point Partners, Citadel Investment Group, and Millennium Management were also bullish on PTC Therapeutics, Inc. (NASDAQ:PTCT), allocating a large percentage of their portfolios to this stock.
Because PTC Therapeutics, Inc. (NASDAQ:PTCT) has witnessed falling interest from hedge fund managers, it's easy to see that there was a specific group of hedge funds that slashed their full holdings in the second quarter. At the top of the heap, Christopher James's Partner Fund Management sold off the largest investment of the "upper crust" of funds tracked by Insider Monkey, valued at about $40.9 million in stock, and Steven Boyd's Armistice Capital was right behind this move, as the fund sold off about $15.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds in the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PTC Therapeutics, Inc. (NASDAQ:PTCT) but similarly valued. These stocks are AAON, Inc. (NASDAQ:AAON), Shake Shack Inc (NYSE:SHAK), South State Corporation (NASDAQ:SSB), and Main Street Capital Corporation (NYSE:MAIN). This group of stocks' market valuations match PTCT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAON,6,6146,1 SHAK,27,440287,8 SSB,14,19985,1 MAIN,4,7969,0 Average,12.75,118597,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $707 million in PTCT's case. Shake Shack Inc (NYSE:SHAK) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks PTC Therapeutics, Inc. (NASDAQ:PTCT) is more popular among hedge funds. 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 PTCT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PTCT were disappointed as the stock returned -24.8% 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.