Did Hedge Funds Make The Right Call On MeiraGTx Holdings plc (MGTX) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards MeiraGTx Holdings plc (NASDAQ:MGTX) and determine whether hedge funds skillfully traded this stock.

MeiraGTx Holdings plc (NASDAQ:MGTX) was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. MGTX has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 21 hedge funds in our database with MGTX holdings at the end of the previous quarter. Our calculations also showed that MGTX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Oleg Nodelman EcoR1 Capital

Oleg Nodelman of EcoR1 Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a look at the new hedge fund action regarding MeiraGTx Holdings plc (NASDAQ:MGTX).

How are hedge funds trading MeiraGTx Holdings plc (NASDAQ:MGTX)?

Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in MGTX a year ago. 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 MeiraGTx Holdings plc (NASDAQ:MGTX) was held by Perceptive Advisors, which reported holding $86.5 million worth of stock at the end of September. It was followed by OrbiMed Advisors with a $48.1 million position. Other investors bullish on the company included Prosight Capital, Adage Capital Management, and 683 Capital Partners. In terms of the portfolio weights assigned to each position Prosight Capital allocated the biggest weight to MeiraGTx Holdings plc (NASDAQ:MGTX), around 3.57% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, setting aside 2.25 percent of its 13F equity portfolio to MGTX.

Due to the fact that MeiraGTx Holdings plc (NASDAQ:MGTX) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few hedge funds who sold off their positions entirely last quarter. Intriguingly, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors dumped the biggest investment of the 750 funds watched by Insider Monkey, comprising about $1.8 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $1.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as MeiraGTx Holdings plc (NASDAQ:MGTX) but similarly valued. We will take a look at ANI Pharmaceuticals Inc (NASDAQ:ANIP), FutureFuel Corp. (NYSE:FF), Trueblue Inc (NYSE:TBI), and United Natural Foods, Inc. (NYSE:UNFI). All of these stocks’ market caps resemble MGTX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANIP 12 47914 -1
FF 11 45441 1
TBI 10 32248 -5
UNFI 18 42616 5
Average 12.75 42055 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $171 million in MGTX’s case. United Natural Foods, Inc. (NYSE:UNFI) is the most popular stock in this table. On the other hand Trueblue Inc (NYSE:TBI) is the least popular one with only 10 bullish hedge fund positions. MeiraGTx Holdings plc (NASDAQ:MGTX) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately MGTX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MGTX were disappointed as the stock returned -1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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