It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Matinas Biopharma Holdings, Inc. (NYSEAMERICAN:MTNB).
Hedge fund interest in Matinas Biopharma Holdings, Inc. (NYSEAMERICAN:MTNB) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Immunic, Inc. (NASDAQ:IMUX), Ranger Energy Services, Inc. (NYSE:RNGR), and Correvio Pharma Corp. (NASDAQ:CORV) to gather more data points. Our calculations also showed that MTNB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Felix Baker of Baker Bros.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s analyze the recent hedge fund action regarding Matinas Biopharma Holdings, Inc. (NYSEAMERICAN:MTNB).
What does smart money think about Matinas Biopharma Holdings, Inc. (NYSEAMERICAN:MTNB)?
At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MTNB over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Matinas Biopharma Holdings, Inc. (NYSEAMERICANMTNB) was held by Vivo Capital, which reported holding $4.3 million worth of stock at the end of September. It was followed by Baker Bros. Advisors with a $1.3 million position. Other investors bullish on the company included Granite Point Capital, Millennium Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Vivo Capital allocated the biggest weight to Matinas Biopharma Holdings, Inc. (NYSEAMERICAN:MTNB), around 0.49% of its 13F portfolio. Granite Point Capital is also relatively very bullish on the stock, earmarking 0.15 percent of its 13F equity portfolio to MTNB.
Since Matinas Biopharma Holdings, Inc. (NYSEAMERICAN:MTNB) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few money managers that decided to sell off their full holdings in the third quarter. It’s worth mentioning that Kevin Kotler’s Broadfin Capital sold off the biggest stake of all the hedgies monitored by Insider Monkey, worth an estimated $0.7 million in stock. David E. Shaw’s fund, D E Shaw, also cut its stock, about $0 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Matinas Biopharma Holdings, Inc. (NYSEAMERICAN:MTNB) but similarly valued. These stocks are Immunic, Inc. (NASDAQ:IMUX), Ranger Energy Services, Inc. (NYSE:RNGR), Correvio Pharma Corp. (NASDAQ:CORV), and Galmed Pharmaceuticals Ltd (NASDAQ:GLMD). All of these stocks’ market caps match MTNB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IMUX | 2 | 540 | 0 |
| RNGR | 3 | 4010 | 0 |
| CORV | 9 | 21674 | 0 |
| GLMD | 10 | 26265 | 2 |
| Average | 6 | 13122 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $7 million in MTNB’s case. Galmed Pharmaceuticals Ltd (NASDAQ:GLMD) is the most popular stock in this table. On the other hand Immunic, Inc. (NASDAQ:IMUX) is the least popular one with only 2 bullish hedge fund positions. Matinas Biopharma Holdings, Inc. (NYSEAMERICAN:MTNB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on MTNB as the stock returned 94.9% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
