At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) investors should pay attention to an increase in hedge fund sentiment of late. Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistics is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 19 hedge funds in our database with PIRS holdings at the end of March. Our calculations also showed that PIRS 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 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.
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 precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. 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 peek at the recent hedge fund action surrounding Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS).
How are hedge funds trading Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS)?
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in PIRS a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Aquilo Capital Management was the largest shareholder of Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS), with a stake worth $17.3 million reported as of the end of September. Trailing Aquilo Capital Management was Biotechnology Value Fund / BVF Inc, which amassed a stake valued at $9.7 million. Renaissance Technologies, Woodline Partners, and Samsara BioCapital 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 Aquilo Capital Management allocated the biggest weight to Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS), around 3.49% of its 13F portfolio. Samsara BioCapital is also relatively very bullish on the stock, dishing out 1.67 percent of its 13F equity portfolio to PIRS.
As aggregate interest increased, key hedge funds have jumped into Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) headfirst. Millennium Management, managed by Israel Englander, established the most outsized position in Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS). Millennium Management had $0.3 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $0.2 million investment in the stock during the quarter. The other funds with brand new PIRS positions are Parvinder Thiara’s Athanor Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) but similarly valued. These stocks are Hamilton Beach Brands Holding Company (NYSE:HBB), Uranium Energy Corp. (NYSE:UEC), Genasys Inc. (NASDAQ:GNSS), Trevena Inc (NASDAQ:TRVN), KVH Industries, Inc. (NASDAQ:KVHI), Parke Bancorp, Inc. (NASDAQ:PKBK), and Willis Lease Finance Corporation (NASDAQ:WLFC). This group of stocks’ market caps are similar to PIRS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $54 million in PIRS’s case. Hamilton Beach Brands Holding Company (NYSE:HBB) is the most popular stock in this table. On the other hand Willis Lease Finance Corporation (NASDAQ:WLFC) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) is more popular among hedge funds. Our overall hedge fund sentiment score for PIRS is 87. 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 PIRS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PIRS were disappointed as the stock returned -33.2% 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.
Disclosure: None. This article was originally published at Insider Monkey.