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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of SpringWorks Therapeutics, Inc. (NASDAQ:SWTX).
Hedge fund interest in SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SWTX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as WNS (Holdings) Limited (NYSE:WNS), Veracyte Inc (NASDAQ:VCYT), and Yalla Group Limited (NYSE:YALA) to gather more data points.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Paul Tudor Jones of Tudor Investment Corp
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. 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 let's check out the key hedge fund action regarding SpringWorks Therapeutics, Inc. (NASDAQ:SWTX).
Do Hedge Funds Think SWTX Is A Good Stock To Buy Now?
At the end of March, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SWTX over the last 23 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, OrbiMed Advisors was the largest shareholder of SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), with a stake worth $455.1 million reported as of the end of March. Trailing OrbiMed Advisors was Perceptive Advisors, which amassed a stake valued at $356.8 million. Driehaus Capital, Consonance Capital Management, and Citadel Investment Group 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 Consonance Capital Management allocated the biggest weight to SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), around 9.42% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, setting aside 4.51 percent of its 13F equity portfolio to SWTX.
Because SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) has witnessed declining sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of fund managers who were dropping their entire stakes by the end of the first quarter. At the top of the heap, Parvinder Thiara's Athanor Capital dumped the largest position of the 750 funds tracked by Insider Monkey, comprising about $1.3 million in stock. Michael Gelband's fund, ExodusPoint Capital, also dumped its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to SpringWorks Therapeutics, Inc. (NASDAQ:SWTX). We will take a look at WNS (Holdings) Limited (NYSE:WNS), Veracyte Inc (NASDAQ:VCYT), Yalla Group Limited (NYSE:YALA), Riot Blockchain, Inc (NASDAQ:RIOT), Agios Pharmaceuticals Inc (NASDAQ:AGIO), Viavi Solutions Inc (NASDAQ:VIAV), and LivaNova PLC (NASDAQ:LIVN). This group of stocks' market caps match SWTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WNS,21,261004,-2 VCYT,19,636621,4 YALA,10,26724,1 RIOT,12,112604,5 AGIO,22,547051,-4 VIAV,28,281525,1 LIVN,28,694228,-2 Average,20,365680,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $366 million. That figure was $1239 million in SWTX's case. Viavi Solutions Inc (NASDAQ:VIAV) is the most popular stock in this table. On the other hand Yalla Group Limited (NYSE:YALA) is the least popular one with only 10 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 68.3. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 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 5.6% since the end of March (through 7/16) 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.