Did Hedge Funds Make The Right Call On Molecular Templates, Inc. (MTEM) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtMolecular Templates, Inc. (NASDAQ:MTEM) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Molecular Templates, Inc. (NASDAQ:MTEM) a bargain? Hedge funds were turning less bullish. The number of long hedge fund positions dropped by 3 recently. Our calculations also showed that MTEM 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). MTEM was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 20 hedge funds in our database with MTEM positions at the end of the previous quarter.

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

To most market participants, hedge funds are viewed as unimportant, outdated investment tools of yesteryear. While there are more than 8000 funds in operation at present, Our researchers hone in on the upper echelon of this group, around 850 funds. These hedge fund managers handle bulk of all hedge funds’ total capital, and by tailing their finest investments, Insider Monkey has identified various investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

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 recent hedge fund action surrounding Molecular Templates, Inc. (NASDAQ:MTEM).

What does smart money think about Molecular Templates, Inc. (NASDAQ:MTEM)?

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 -15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MTEM over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is MTEM A Good Stock To Buy?

Among these funds, Biotechnology Value Fund / BVF Inc held the most valuable stake in Molecular Templates, Inc. (NASDAQ:MTEM), which was worth $37.9 million at the end of the third quarter. On the second spot was Perceptive Advisors which amassed $32.9 million worth of shares. Polar Capital, Great Point Partners, and Kingdon Capital 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 Biotechnology Value Fund / BVF Inc allocated the biggest weight to Molecular Templates, Inc. (NASDAQ:MTEM), around 3.53% of its 13F portfolio. Logos Capital is also relatively very bullish on the stock, designating 2.22 percent of its 13F equity portfolio to MTEM.

Because Molecular Templates, Inc. (NASDAQ:MTEM) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that elected to cut their entire stakes last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising about $3.5 million in stock. Lawrence Hawkins’s fund, Prosight Capital, also dropped its stock, about $2.3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Molecular Templates, Inc. (NASDAQ:MTEM) but similarly valued. These stocks are Akero Therapeutics, Inc. (NASDAQ:AKRO), Axcelis Technologies Inc (NASDAQ:ACLS), The RealReal, Inc. (NASDAQ:REAL), and Radius Health Inc (NASDAQ:RDUS). This group of stocks’ market values match MTEM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AKRO 14 112061 5
ACLS 13 81385 1
REAL 15 79260 2
RDUS 23 111468 1
Average 16.25 96044 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $143 million in MTEM’s case. Radius Health Inc (NASDAQ:RDUS) is the most popular stock in this table. On the other hand Axcelis Technologies Inc (NASDAQ:ACLS) is the least popular one with only 13 bullish hedge fund positions. Molecular Templates, Inc. (NASDAQ:MTEM) 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 MTEM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MTEM were disappointed as the stock returned -10.7% 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.