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SpringWorks Therapeutics, Inc. (SWTX): Hedge Funds Are Snapping Up

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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards SpringWorks Therapeutics, Inc. (NASDAQ:SWTX).

SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) investors should be aware of an increase in activity from the world's largest hedge funds recently. SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) was in 21 hedge funds' portfolios at the end of September. The all time high for this statistic is 22. Our calculations also showed that SWTX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind we're going to take a gander at the recent hedge fund action regarding SpringWorks Therapeutics, Inc. (NASDAQ:SWTX).

Joseph Edelman of Perceptive Advisors
Joseph Edelman of Perceptive Advisors

Joseph Edelman of Perceptive Advisors

Do Hedge Funds Think SWTX Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards SWTX over the last 25 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) was held by OrbiMed Advisors, which reported holding $382.4 million worth of stock at the end of September. It was followed by Perceptive Advisors with a $307.7 million position. Other investors bullish on the company included Driehaus Capital, Adage Capital Management, and Deerfield Management. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), around 10.63% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, designating 4.47 percent of its 13F equity portfolio to SWTX.

As one would reasonably expect, key hedge funds have jumped into SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) headfirst. CaaS Capital, managed by Frank Fu, created the most outsized position in SpringWorks Therapeutics, Inc. (NASDAQ:SWTX). CaaS Capital had $7.1 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $2.9 million investment in the stock during the quarter. The following funds were also among the new SWTX investors: Paul Marshall and Ian Wace's Marshall Wace LLP, Peter Muller's PDT Partners, and Jinghua Yan's TwinBeech Capital.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) but similarly valued. We will take a look at Hillenbrand, Inc. (NYSE:HI), ALLETE Inc (NYSE:ALE), Clear Secure Inc. (NYSE:YOU), 360 DigiTech, Inc. (NASDAQ:QFIN), NuVasive, Inc. (NASDAQ:NUVA), ForgeRock Inc. (NYSE:FORG), and Mr. Cooper Group Inc. (NASDAQ:COOP). This group of stocks' market values match SWTX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HI,13,39367,-1 ALE,12,70780,2 YOU,9,69656,9 QFIN,14,43523,0 NUVA,18,221745,-5 FORG,19,88807,19 COOP,27,670905,-1 Average,16,172112,3.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $966 million in SWTX's case. Mr. Cooper Group Inc. (NASDAQ:COOP) is the most popular stock in this table. On the other hand Clear Secure Inc. (NYSE:YOU) is the least popular one with only 9 bullish hedge fund positions. SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SWTX is 70. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately SWTX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SWTX were disappointed as the stock returned -2.3% since the end of September (through 12/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.