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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Repare Therapeutics Inc. (NASDAQ:RPTX) makes for a good investment right now.
Is RPTX a good stock to buy now? The best stock pickers were in a pessimistic mood. The number of long hedge fund positions decreased by 2 recently. Repare Therapeutics Inc. (NASDAQ:RPTX) was in 15 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 17. Our calculations also showed that RPTX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 17 hedge funds in our database with RPTX positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Peter Kolchinsky of RA Capital Management
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we're going to go over the key hedge fund action regarding Repare Therapeutics Inc. (NASDAQ:RPTX).
Do Hedge Funds Think RPTX Is A Good Stock To Buy Now?
At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in RPTX a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Repare Therapeutics Inc. (NASDAQ:RPTX) was held by OrbiMed Advisors, which reported holding $105.4 million worth of stock at the end of September. It was followed by Biotechnology Value Fund / BVF Inc with a $94.3 million position. Other investors bullish on the company included Redmile Group, Logos Capital, and RA Capital Management. In terms of the portfolio weights assigned to each position Biotechnology Value Fund / BVF Inc allocated the biggest weight to Repare Therapeutics Inc. (NASDAQ:RPTX), around 5.14% of its 13F portfolio. Logos Capital is also relatively very bullish on the stock, dishing out 3.97 percent of its 13F equity portfolio to RPTX.
Due to the fact that Repare Therapeutics Inc. (NASDAQ:RPTX) has experienced a decline in interest from the smart money, we can see that there was a specific group of hedgies that elected to cut their entire stakes last quarter. Interestingly, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management dumped the biggest position of the 750 funds tracked by Insider Monkey, worth an estimated $8.5 million in stock. fund, Farallon Capital, also sold off its stock, about $4.7 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Repare Therapeutics Inc. (NASDAQ:RPTX). We will take a look at Tronox Holdings Plc (NYSE:TROX), Enerpac Tool Group Corp. (NYSE:EPAC), Radware Ltd. (NASDAQ:RDWR), Plains GP Holdings LP (NYSE:PAGP), Domo Inc. (NASDAQ:DOMO), Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT), and U.S. Physical Therapy, Inc. (NYSE:USPH). This group of stocks' market values are closest to RPTX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TROX,19,69798,-2 EPAC,11,83786,-7 RDWR,10,256298,-3 PAGP,18,74928,-1 DOMO,24,252079,3 ARQT,9,526942,-1 USPH,10,38330,1 Average,14.4,186023,-1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.4 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $360 million in RPTX's case. Domo Inc. (NASDAQ:DOMO) is the most popular stock in this table. On the other hand Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) is the least popular one with only 9 bullish hedge fund positions. Repare Therapeutics Inc. (NASDAQ:RPTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RPTX is 49.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on RPTX as the stock returned 28.4% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.