Do Hedge Funds Love Morphic Holding, Inc. (MORF)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 873 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of June 30th, 2021. In this article we are going to take a look at smart money sentiment towards Morphic Holding, Inc. (NASDAQ:MORF).

Morphic Holding, Inc. (NASDAQ:MORF) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 22. MORF has experienced a decrease in support from the world’s most elite money managers lately. There were 22 hedge funds in our database with MORF holdings at the end of March. Our calculations also showed that MORF isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most traders, hedge funds are seen as worthless, outdated investment tools of years past. While there are more than 8000 funds with their doors open at present, We hone in on the top tier of this club, approximately 850 funds. These money managers control bulk of all hedge funds’ total asset base, and by keeping an eye on their highest performing equity investments, Insider Monkey has identified numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Now we’re going to take a gander at the recent hedge fund action regarding Morphic Holding, Inc. (NASDAQ:MORF).

Do Hedge Funds Think MORF Is A Good Stock To Buy Now?

At second quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MORF over the last 24 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

More specifically, EcoR1 Capital was the largest shareholder of Morphic Holding, Inc. (NASDAQ:MORF), with a stake worth $226.8 million reported as of the end of June. Trailing EcoR1 Capital was Perceptive Advisors, which amassed a stake valued at $53.8 million. Driehaus Capital, Alkeon Capital Management, and Rubric 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 EcoR1 Capital allocated the biggest weight to Morphic Holding, Inc. (NASDAQ:MORF), around 8.48% of its 13F portfolio. SilverArc Capital is also relatively very bullish on the stock, setting aside 2.66 percent of its 13F equity portfolio to MORF.

Because Morphic Holding, Inc. (NASDAQ:MORF) has faced declining sentiment from hedge fund managers, logic holds that there were a few funds that slashed their positions entirely in the second quarter. It’s worth mentioning that Neil Shahrestani’s Ikarian Capital dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $3.2 million in stock. Matthew L Pinz’s fund, Pinz Capital, also sold off its stock, about $3.1 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to Morphic Holding, Inc. (NASDAQ:MORF). These stocks are Raven Industries, Inc. (NASDAQ:RAVN), Equinox Gold Corp. (NYSE:EQX), Service Properties Trust (NASDAQ:SVC), Empire State Realty Trust Inc (NYSE:ESRT), 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), GMS Inc. (NYSE:GMS), and USANA Health Sciences, Inc. (NYSE:USNA). This group of stocks’ market caps are similar to MORF’s market cap.

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As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $420 million in MORF’s case. 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) is the most popular stock in this table. On the other hand Service Properties Trust (NASDAQ:SVC) is the least popular one with only 13 bullish hedge fund positions. Morphic Holding, Inc. (NASDAQ:MORF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MORF is 55.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately MORF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MORF were disappointed as the stock returned 1.2% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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