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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Virios Therapeutics, Inc. (NASDAQ:VIRI).
Is VIRI a good stock to buy? Virios Therapeutics, Inc. (NASDAQ:VIRI) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 2. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. VIRI has experienced an increase in support from the world's most elite money managers of late. There were 2 hedge funds in our database with VIRI positions at the end of the fourth quarter. Our calculations also showed that VIRI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 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.
John Overdeck of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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. Keeping this in mind we're going to take a look at the fresh hedge fund action surrounding Virios Therapeutics, Inc. (NASDAQ:VIRI).
Do Hedge Funds Think VIRI Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in VIRI a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Masters Capital Management held the most valuable stake in Virios Therapeutics, Inc. (NASDAQ:VIRI), which was worth $3.4 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $0.2 million worth of shares. Millennium Management was 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 Masters Capital Management allocated the biggest weight to Virios Therapeutics, Inc. (NASDAQ:VIRI), around 0.11% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, setting aside 0.0006 percent of its 13F equity portfolio to VIRI.
As industrywide interest jumped, key hedge funds have jumped into Virios Therapeutics, Inc. (NASDAQ:VIRI) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the biggest position in Virios Therapeutics, Inc. (NASDAQ:VIRI). Two Sigma Advisors had $0.2 million invested in the company at the end of the quarter.
Let's also examine hedge fund activity in other stocks similar to Virios Therapeutics, Inc. (NASDAQ:VIRI). We will take a look at NLS Pharmaceutics AG (NASDAQ:NLSP), Tremont Mortgage Trust (NASDAQ:TRMT), Broadway Financial Corporation (NASDAQ:BYFC), Comstock Holding Companies, Inc. (NASDAQ:CHCI), China Jo Jo Drugstores Inc (NASDAQ:CJJD), Air Industries Group (NYSE:AIRI), and Elmira Savings Bank (NASDAQ:ESBK). All of these stocks' market caps resemble VIRI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NLSP,3,799,3 TRMT,3,1284,1 BYFC,3,1142,-1 CHCI,2,2312,-1 CJJD,6,7692,1 AIRI,1,69,-1 ESBK,1,166,0 Average,2.7,1923,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.7 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $4 million in VIRI's case. China Jo Jo Drugstores Inc (NASDAQ:CJJD) is the most popular stock in this table. On the other hand Air Industries Group (NYSE:AIRI) is the least popular one with only 1 bullish hedge fund positions. Virios Therapeutics, Inc. (NASDAQ:VIRI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VIRI is 56. 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately VIRI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on VIRI were disappointed as the stock returned 7% since the end of March (through 6/11) 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.