Many top investors including Warren Buffett, David Tepper and Stan Druckenmiller have been cautious of the current bull market and missed out as the stock market has hit a new high in recent weeks. On the flip side, tech hedge funds weren’t shy and posted double-digit gains in the market. Financials, energy and industrials initially suffered the most, but many have posted strong returns since November and hedge funds have actually increased their positions in these stocks. In this article, we’ll find out how hedge fund sentiment towards PMV Pharmaceuticals, Inc. (NASDAQ: PMVP) has changed recently.
Interest of hedge funds in PMV Pharmaceuticals, Inc. (NASDAQ: PMVP) shares was stable at the end of the last quarter. This is usually a negative indicator. Our calculations also showed that PMVP is not among the top 30 most popular stocks among hedge funds (click for Q1 rank). The level and evolution of the popularity of hedge funds are not the only variables to analyze in deciphering the outlook for hedge funds. A stock may experience an increase in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we’ll be looking at companies like Establishment Labs Holdings Inc. (NASDAQ: ESTA), AAR Corp. (NYSE: AIR) and Hyster-Yale Materials Handling Inc (NYSE: HY) to collect more data points.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year 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
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Do hedge funds think PMVP is a good stock to buy now?
As the second quarter of 2021 approached, a total of 21 of the hedge funds tracked by Insider Monkey were long in this stock, a change of 0% from the previous quarter. The chart below shows the number of hedge funds with a bullish position in PMVP over the past 23 quarters. So let’s see which hedge funds were among the top stock holders and which hedge funds were making big moves.
Of these funds, OrbiMed Advisors held the largest stake in PMV Pharmaceuticals, Inc. (NASDAQ: PMVP), which stood at $ 241.1 million at the end of the fourth quarter. In second place was Euclidian Capital, which raised $ 137.5 million in shares. Avoro Capital Advisors (venBio Select Advisor), Viking Global and RA Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders in the company. In terms of the portfolio weights assigned to each position, Euclidian Capital assigned the largest weight to PMV Pharmaceuticals, Inc. (NASDAQ: PMVP), approximately 45.99% of its 13F portfolio. Octagon Capital Advisors is also relatively very bullish on the stock, distributing 3.1% of its 13F equity portfolio to PMVP.
As PMV Pharmaceuticals, Inc. (NASDAQ: PMVP) has seen a decline in interest from the entire hedge fund industry, it’s easy to see that a specific group of fund managers have sold the hedge fund industry. all of its holdings last quarter. Interestingly, DE Shaw from DE Shaw lost the biggest position of the 750 funds, followed by Insider Monkey, worth around $ 1.8 million in shares. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also abandoned its shares, valued at around $ 1 million. These bearish behaviors are interesting because the total interest of hedge funds has remained the same (this is a bearish signal in our experience).
Let’s also take a look at hedge fund activity in other stocks – not necessarily in the same industry as PMV Pharmaceuticals, Inc. (NASDAQ: PMVP) but of similar value. We’re going to take a look at Establishment Labs Holdings Inc. (NASDAQ: ESTA), AAR Corp. (NYSE: AIR), Hyster-Yale Materials Handling Inc (NYSE: HY), Groupon Inc (NASDAQ: GRPN), CSG Systems International, Inc. (NASDAQ: CSGS), Studio City International Holdings Limited (NYSE: MSC) and DermTech , Inc. (NASDAQ: DMTK). All market capitalizations of these stocks are similar to the market capitalization of PMVP.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF position ESTA, 13.276217, -1 AIR, 20.150229.5 HY, 12.91388.2 GRPN, 25.376177, – 1 CSGS , 23.141997.1 MSC, 3.226997.0 DMTK, 18.303148.4 Medium, 16.3.223736,1.4 [/table]
Check the table here if you have formatting issues.
As you can see, these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $ 224 million. That figure was $ 698 million in the case of PMVP. Groupon Inc (NASDAQ: GRPN) is the most popular stock in this table. On the other hand, Studio City International Holdings Limited (NYSE: MSC) is the least popular with only 3 bullish hedge fund positions. PMV Pharmaceuticals, Inc. (NASDAQ: PMVP) isn’t the most popular stock in this group, but hedge fund interest is still above average. Our overall hedge fund sentiment score for PMVP is 75.9. Stocks with a 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 prefer to spend our time researching the stocks on which hedge funds are accumulating. Our calculations showed that the 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 16 and again beat the market by 7.7 percentage points. Unfortunately, PMVP was not as popular as these 5 stocks and the hedge funds that bet on PMVP were disappointed as the stock has returned 2.2% since the end of March (through 7/16) and has underperformed the market. If you want to invest in large cap stocks with huge upside potential, you should check out the 5 most popular stocks among hedge funds, as many of these stocks have already outperformed the market since 2019.
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Disclosure: none. This article originally appeared on Insider Monkey.