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Did Hedge Funds Make The Right Call On Turning Point Therapeutics, Inc. (TPTX) ?

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 thoughtTurning Point Therapeutics, Inc. (NASDAQ:TPTX) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Turning Point Therapeutics, Inc. (NASDAQ:TPTX) the right investment to pursue these days? Money managers were taking a bearish view. The number of bullish hedge fund positions were cut by 4 in recent months. Our calculations also showed that TPTX 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.

To most market participants, hedge funds are perceived as slow, old financial vehicles of the past. While there are over 8000 funds in operation at the moment, Our experts hone in on the leaders of this group, around 850 funds. These investment experts manage most of the smart money’s total asset base, and by tracking their matchless stock picks, Insider Monkey has unsheathed various investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun 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 .

Samuel Isaly - Orbimed Advisors

Samuel Isaly of OrbiMed Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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 let’s take a gander at the latest hedge fund action regarding Turning Point Therapeutics, Inc. (NASDAQ:TPTX).

What does smart money think about Turning Point Therapeutics, Inc. (NASDAQ:TPTX)?

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in TPTX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Cormorant Asset Management held the most valuable stake in Turning Point Therapeutics, Inc. (NASDAQ:TPTX), which was worth $136.5 million at the end of the third quarter. On the second spot was OrbiMed Advisors which amassed $122.6 million worth of shares. Alkeon Capital Management, Deerfield Management, and Perceptive Advisors 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 Cormorant Asset Management allocated the biggest weight to Turning Point Therapeutics, Inc. (NASDAQ:TPTX), around 6.34% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, dishing out 3.2 percent of its 13F equity portfolio to TPTX.

Judging by the fact that Turning Point Therapeutics, Inc. (NASDAQ:TPTX) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies who were dropping their positions entirely heading into Q4. At the top of the heap, James A. Silverman’s Opaleye Management sold off the largest position of the “upper crust” of funds followed by Insider Monkey, worth close to $21.2 million in stock, and Mark Hart III’s Corriente Advisors was right behind this move, as the fund dumped about $17.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Turning Point Therapeutics, Inc. (NASDAQ:TPTX) but similarly valued. These stocks are PriceSmart, Inc. (NASDAQ:PSMT), Ping Identity Holding Corp. (NYSE:PING), WesBanco, Inc. (NASDAQ:WSBC), and Noah Holdings Limited (NYSE:NOAH). This group of stocks’ market valuations are similar to TPTX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSMT 11 35029 -7
PING 11 53376 1
WSBC 9 31703 -2
NOAH 14 320880 -1
Average 11.25 110247 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $360 million in TPTX’s case. Noah Holdings Limited (NYSE:NOAH) is the most popular stock in this table. On the other hand WesBanco, Inc. (NASDAQ:WSBC) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Turning Point Therapeutics, Inc. (NASDAQ:TPTX) 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 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on TPTX as the stock returned 40.3% since Q1 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.