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 (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 Puma Biotechnology Inc (NASDAQ:PBYI) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is Puma Biotechnology Inc (NASDAQ:PBYI) the right investment to pursue these days? The best stock pickers were becoming less hopeful. The number of long hedge fund positions were cut by 2 lately. Puma Biotechnology Inc (NASDAQ:PBYI) was in 18 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 29. Our calculations also showed that PBYI isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 20 hedge funds in our database with PBYI holdings at the end of March. Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are assumed to be underperforming, old financial tools of yesteryear. While there are over 8000 funds with their doors open today, Our experts hone in on the moguls of this group, about 850 funds. These hedge fund managers shepherd the majority of all hedge funds' total capital, and by tailing their finest picks, Insider Monkey has formulated numerous investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
William Leland Edwards of Palo Alto Investors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let's take a look at the latest hedge fund action regarding Puma Biotechnology Inc (NASDAQ:PBYI).
What have hedge funds been doing with Puma Biotechnology Inc (NASDAQ:PBYI)?
At Q2's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the first quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in PBYI 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.
More specifically, Camber Capital Management was the largest shareholder of Puma Biotechnology Inc (NASDAQ:PBYI), with a stake worth $25 million reported as of the end of September. Trailing Camber Capital Management was Renaissance Technologies, which amassed a stake valued at $15.3 million. Tang Capital Management, Palo Alto Investors, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Camber Capital Management allocated the biggest weight to Puma Biotechnology Inc (NASDAQ:PBYI), around 1.43% of its 13F portfolio. Tang Capital Management is also relatively very bullish on the stock, earmarking 1.38 percent of its 13F equity portfolio to PBYI.
Because Puma Biotechnology Inc (NASDAQ:PBYI) has experienced declining sentiment from the aggregate hedge fund industry, it's easy to see that there is a sect of funds that slashed their full holdings by the end of the second quarter. Interestingly, Oleg Nodelman's EcoR1 Capital sold off the biggest stake of the 750 funds followed by Insider Monkey, worth about $21.4 million in stock, and James E. Flynn's Deerfield Management was right behind this move, as the fund sold off about $8.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Puma Biotechnology Inc (NASDAQ:PBYI) but similarly valued. These stocks are PolyMet Mining Corp. (NYSE:PLM), Caesarstone Ltd (NASDAQ:CSTE), Organogenesis Holdings Inc. (NASDAQ:ORGO), DMC Global Inc. (NASDAQ:BOOM), Progenity, Inc. (NASDAQ:PROG), Ducommun Incorporated (NYSE:DCO), and Heritage-Crystal Clean, Inc. (NASDAQ:HCCI). All of these stocks' market caps resemble PBYI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLM,4,512,1 CSTE,7,14471,-3 ORGO,3,2776,-2 BOOM,9,12639,-3 PROG,10,9038,10 DCO,8,39624,-3 HCCI,12,42681,4 Average,7.6,17392,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.6 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $96 million in PBYI's case. Heritage-Crystal Clean, Inc. (NASDAQ:HCCI) is the most popular stock in this table. On the other hand Organogenesis Holdings Inc. (NASDAQ:ORGO) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Puma Biotechnology Inc (NASDAQ:PBYI) is more popular among hedge funds. Our overall hedge fund sentiment score for PBYI is 71.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. Unfortunately PBYI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on PBYI were disappointed as the stock returned -3.3% 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Get real-time email alerts: Follow Puma Biotechnology Inc. (NYSE:PBYI)
Disclosure: None. This article was originally published at Insider Monkey.