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G1 Therapeutics, Inc. (GTHX): Are Hedge Funds Right About This Stock?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like G1 Therapeutics, Inc. (NASDAQ:GTHX).

G1 Therapeutics, Inc. (NASDAQ:GTHX) shareholders have witnessed an increase in support from the world’s most elite money managers lately. GTHX was in 14 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with GTHX positions at the end of the previous quarter. Our calculations also showed that GTHX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are a multitude of metrics investors put to use to size up stocks. A pair of the less utilized metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best money managers can outclass the broader indices by a very impressive margin (see the details here).

Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the fresh hedge fund action encompassing G1 Therapeutics, Inc. (NASDAQ:GTHX).

What have hedge funds been doing with G1 Therapeutics, Inc. (NASDAQ:GTHX)?

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in GTHX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Lei Zhang’s Hillhouse Capital Management has the most valuable position in G1 Therapeutics, Inc. (NASDAQ:GTHX), worth close to $21.6 million, comprising 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Redmile Group, managed by Jeremy Green, which holds a $8.9 million position; 0.3% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions encompass Israel Englander’s Millennium Management, Kevin C. Tang’s Tang Capital Management and Julian Baker and Felix Baker’s Baker Bros. Advisors. In terms of the portfolio weights assigned to each position Opus Point Partners Management allocated the biggest weight to G1 Therapeutics, Inc. (NASDAQ:GTHX), around 0.86% of its 13F portfolio. Birchview Capital is also relatively very bullish on the stock, earmarking 0.61 percent of its 13F equity portfolio to GTHX.

Consequently, key money managers have jumped into G1 Therapeutics, Inc. (NASDAQ:GTHX) headfirst. Hillhouse Capital Management, managed by Lei Zhang, created the most valuable position in G1 Therapeutics, Inc. (NASDAQ:GTHX). Hillhouse Capital Management had $21.6 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $1.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Bihua Chen’s Cormorant Asset Management, Cliff Asness’s AQR Capital Management, and Joseph Edelman’s Perceptive Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as G1 Therapeutics, Inc. (NASDAQ:GTHX) but similarly valued. These stocks are German American Bancorp., Inc. (NASDAQ:GABC), Chatham Lodging Trust (NYSE:CLDT), Cara Therapeutics Inc (NASDAQ:CARA), and SP Plus Corporation (NASDAQ:SP). All of these stocks’ market caps resemble GTHX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GABC 6 14967 -1
CLDT 8 55426 0
CARA 11 104858 3
SP 11 99127 -2
Average 9 68595 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $49 million in GTHX’s case. Cara Therapeutics Inc (NASDAQ:CARA) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks G1 Therapeutics, Inc. (NASDAQ:GTHX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GTHX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GTHX were disappointed as the stock returned -5.2% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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