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Were Hedge Funds Right About TG Therapeutics Inc (TGTX)?

Abigail Fisher

Hedge funds don't get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don't realize is that 100% of the passive funds didn't see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we look at what hedge funds think of TG Therapeutics Inc (NASDAQ:TGTX).

TG Therapeutics Inc (NASDAQ:TGTX) was in 22 hedge funds' portfolios at the end of the fourth quarter of 2019. TGTX investors should pay attention to an increase in hedge fund interest in recent months. There were 19 hedge funds in our database with TGTX positions at the end of the previous quarter. Our calculations also showed that TGTX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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 41 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.

[caption id="attachment_261250" align="aligncenter" width="399"] Peter Kolchinsky of RA Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's go over the recent hedge fund action encompassing TG Therapeutics Inc (NASDAQ:TGTX).

What have hedge funds been doing with TG Therapeutics Inc (NASDAQ:TGTX)?

Heading into the first quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TGTX over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

More specifically, RA Capital Management was the largest shareholder of TG Therapeutics Inc (NASDAQ:TGTX), with a stake worth $109.7 million reported as of the end of September. Trailing RA Capital Management was Great Point Partners, which amassed a stake valued at $60.3 million. Millennium Management, Bridger Management, and Renaissance Technologies 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 Great Point Partners allocated the biggest weight to TG Therapeutics Inc (NASDAQ:TGTX), around 5.25% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, designating 3.33 percent of its 13F equity portfolio to TGTX.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Great Point Partners, managed by Jeffrey Jay and David Kroin, established the largest position in TG Therapeutics Inc (NASDAQ:TGTX). Great Point Partners had $60.3 million invested in the company at the end of the quarter. Panayotis Takis Sparaggis's Alkeon Capital Management also made a $11.1 million investment in the stock during the quarter. The following funds were also among the new TGTX investors: Behzad Aghazadeh's Avoro Capital Advisors (venBio Select Advisor), Steven Boyd's Armistice Capital, and Neil Shahrestani's Ikarian Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as TG Therapeutics Inc (NASDAQ:TGTX) but similarly valued. These stocks are M/I Homes Inc (NYSE:MHO), Realogy Holdings Corp (NYSE:RLGY), Sculptor Capital Management, Inc. (NYSE:SCU), and Delphi Technologies PLC (NYSE:DLPH). All of these stocks' market caps are closest to TGTX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MHO,20,71843,1 RLGY,30,478410,5 SCU,12,85038,1 DLPH,17,155844,-4 Average,19.75,197784,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $320 million in TGTX's case. Realogy Holdings Corp (NYSE:RLGY) is the most popular stock in this table. On the other hand Sculptor Capital Management, Inc. (NYSE:SCU) is the least popular one with only 12 bullish hedge fund positions. TG Therapeutics Inc (NASDAQ:TGTX) is not the most popular stock in this group but hedge fund interest is still above average. 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 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. Hedge funds were also right about betting on TGTX as the stock returned 1.4% in 2020 (through May 1st) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

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

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