Hedge Funds Are Coming Back To Five Prime Therapeutics Inc (FPRX)

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 second 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 5 years and analyze what the smart money thinks of Five Prime Therapeutics Inc (NASDAQ:FPRX) based on that data and determine whether they were really smart about the stock.

Five Prime Therapeutics Inc (NASDAQ:FPRX) shareholders have witnessed an increase in support from the world’s most elite money managers of late. Five Prime Therapeutics Inc (NASDAQ:FPRX) was in 19 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 25. Our calculations also showed that FPRX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Oleg Nodelman EcoR1 Capital

Oleg Nodelman of EcoR1 Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a look at the latest hedge fund action encompassing Five Prime Therapeutics Inc (NASDAQ:FPRX).

Hedge fund activity in Five Prime Therapeutics Inc (NASDAQ:FPRX)

At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in FPRX a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in Five Prime Therapeutics Inc (NASDAQ:FPRX) was held by Biotechnology Value Fund / BVF Inc, which reported holding $48.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $10.6 million position. Other investors bullish on the company included Two Sigma Advisors, Rock Springs Capital Management, and EcoR1 Capital. In terms of the portfolio weights assigned to each position Biotechnology Value Fund / BVF Inc allocated the biggest weight to Five Prime Therapeutics Inc (NASDAQ:FPRX), around 3% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to FPRX.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Five Prime Therapeutics Inc (NASDAQ:FPRX) headfirst. Endurant Capital Management, managed by Vishal Saluja and Pham Quang, created the most valuable position in Five Prime Therapeutics Inc (NASDAQ:FPRX). Endurant Capital Management had $1.4 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.3 million position during the quarter. The following funds were also among the new FPRX investors: Parvinder Thiara’s Athanor Capital and Efrem Kamen’s Pura Vida Investments.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Five Prime Therapeutics Inc (NASDAQ:FPRX) but similarly valued. These stocks are GTY Technology Holdings, Inc. (NASDAQ:GTYH), Hersha Hospitality Trust (NYSE:HT), Evofem Biosciences, Inc. (NASDAQ:EVFM), Kandi Technolgies Group Inc. (NASDAQ:KNDI), Southern Missouri Bancorp, Inc. (NASDAQ:SMBC), Fidus Investment Corp (NASDAQ:FDUS), and Tiptree Inc. (NASDAQ:TIPT). This group of stocks’ market values are closest to FPRX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GTYH 4 13910 -1
HT 12 11164 2
EVFM 15 23307 11
KNDI 2 908 1
SMBC 3 10572 0
FDUS 4 3937 -4
TIPT 2 922 -2
Average 6 9246 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $80 million in FPRX’s case. Evofem Biosciences, Inc. (NASDAQ:EVFM) is the most popular stock in this table. On the other hand Kandi Technolgies Group Inc. (NASDAQ:KNDI) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Five Prime Therapeutics Inc (NASDAQ:FPRX) is more popular among hedge funds. Our overall hedge fund sentiment score for FPRX is 80.8. 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. 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 gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. Unfortunately FPRX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FPRX were disappointed as the stock returned -23% during the third 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Follow Five Prime Therapeutics Inc. (NASDAQ:FPRX)

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