Do Hedge Funds Love MacroGenics Inc (MGNX)?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in MacroGenics Inc (NASDAQ:MGNX).

Is MacroGenics Inc (NASDAQ:MGNX) the right pick for your portfolio? The best stock pickers seem to be taking a slightly bearish view as the number of funds bullish on the stock inched down by one during the third quarter. In this way, 17 funds from our database held shares of MGNX at the end of September. At the end of this article we will also compare MGNX to other stocks including Clayton Williams Energy, Inc. (NASDAQ:CWEI), NCI Building Systems, Inc. (NYSE:NCS), and Stewart Information Services Corp (NYSE:STC) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

Keeping this in mind, let’s take a glance at the key action regarding MacroGenics Inc (NASDAQ:MGNX).

What have hedge funds been doing with MacroGenics Inc (NASDAQ:MGNX)?

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 6% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards MGNX over the last five quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Steve Cohen’s Point72 Asset Management holds the largest position in MacroGenics Inc (NASDAQ:MGNX) which has a $54.2 million position in the stock. On Point72 Asset Management’s heels is John Griffin’s Blue Ridge Capital, with a $40.7 million position. Some other professional money managers that hold long positions include Bihua Chen’s Cormorant Asset Management, Julian Baker and Felix Baker’s Baker Bros. Advisors, and Julian Robertson’s Tiger Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Seeing as MacroGenics Inc (NASDAQ:MGNX) has experienced falling interest from hedge fund managers, it’s easy to see that there were a few funds that slashed their entire stakes last quarter. At the top of the heap, First Eagle Investment Management cut the biggest investment of the 700 funds studied by Insider Monkey, valued at close to $6 million in stock, and Mark Lampert’s Biotechnology Value Fund / BVF Inc was right behind this move, as the fund sold off about $5.4 million worth of shares.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as MacroGenics Inc (NASDAQ:MGNX) but similarly valued. We will take a look at Clayton Williams Energy, Inc. (NASDAQ:CWEI), NCI Building Systems, Inc. (NYSE:NCS), Stewart Information Services Corp (NYSE:STC), and ACCO Brands Corporation (NYSE:ACCO). All of these stocks’ market caps are closest to MGNX’s market cap.

As you can see these stocks had an average of 19 investors with bullish positions and the average amount invested in these stocks was $176 million, versus $167 million in MGNX’s case. NCI Building Systems, Inc. (NYSE:NCS) is the most popular stock in this table. On the other hand Clayton Williams Energy, Inc. (NASDAQ:CWEI) is the least popular one with only 13 funds holding shares. MacroGenics Inc (NASDAQ:MGNX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NCI Building Systems, Inc. (NYSE:NCS) might be a better candidate to consider taking a long position in.

Disclosure: None