Did Hedge Funds Make The Right Call On TG Therapeutics Inc (TGTX) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of TG Therapeutics Inc (NASDAQ:TGTX) based on that data and determine whether they were really smart about the stock.

Is TG Therapeutics Inc (NASDAQ:TGTX) undervalued? Hedge funds were getting more bullish. The number of long hedge fund positions inched up by 4 in recent months. Our calculations also showed that TGTX 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 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Kamran Moghtaderi of Eversept Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind we’re going to take a gander at the key hedge fund action encompassing TG Therapeutics Inc (NASDAQ:TGTX).

Hedge fund activity in TG Therapeutics Inc (NASDAQ:TGTX)

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the fourth quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in TGTX a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, RA Capital Management held the most valuable stake in TG Therapeutics Inc (NASDAQ:TGTX), which was worth $102.2 million at the end of the third quarter. On the second spot was Great Point Partners which amassed $25.2 million worth of shares. Eversept Partners, Citadel Investment Group, and Alkeon Capital Management 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 Eversept Partners allocated the biggest weight to TG Therapeutics Inc (NASDAQ:TGTX), around 6.13% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, dishing out 3.23 percent of its 13F equity portfolio to TGTX.

As aggregate interest increased, key money managers have jumped into TG Therapeutics Inc (NASDAQ:TGTX) headfirst. Mangrove Partners, managed by Nathaniel August, created the largest position in TG Therapeutics Inc (NASDAQ:TGTX). Mangrove Partners had $12.2 million invested in the company at the end of the quarter. Arsani William’s Logos Capital also initiated a $2.5 million position during the quarter. The other funds with brand new TGTX positions are Dmitry Balyasny’s Balyasny Asset Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as TG Therapeutics Inc (NASDAQ:TGTX) but similarly valued. These stocks are Plug Power, Inc. (NASDAQ:PLUG), New Frontier Health Corporation (NYSE:NFH), Inovio Pharmaceuticals Inc (NASDAQ:INO), and Urban Edge Properties (NYSE:UE). All of these stocks’ market caps are similar to TGTX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLUG 15 92142 2
NFH 16 172547 4
INO 8 22544 3
UE 21 68712 2
Average 15 88986 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $260 million in TGTX’s case. Urban Edge Properties (NYSE:UE) is the most popular stock in this table. On the other hand Inovio Pharmaceuticals Inc (NASDAQ:INO) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks TG Therapeutics Inc (NASDAQ:TGTX) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on TGTX as the stock returned 98% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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