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Hedge Funds Are Done Selling Gritstone Oncology, Inc. (GRTS)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Gritstone Oncology, Inc. (NASDAQ:GRTS).

Gritstone Oncology, Inc. (NASDAQ:GRTS) has seen an increase in support from the world’s most elite money managers recently. Our calculations also showed that GRTS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Nathan Fischel DAFNA Capital

Nathan Fischel of DAFNA Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the fresh hedge fund action regarding Gritstone Oncology, Inc. (NASDAQ:GRTS).

What does smart money think about Gritstone Oncology, Inc. (NASDAQ:GRTS)?

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GRTS over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Gritstone Oncology, Inc. (NASDAQ:GRTS) was held by Redmile Group, which reported holding $17.9 million worth of stock at the end of September. It was followed by Casdin Capital with a $13.2 million position. Other investors bullish on the company included Frazier Healthcare Partners, Citadel Investment Group, and DAFNA Capital Management. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to Gritstone Oncology, Inc. (NASDAQ:GRTS), around 1.4% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, setting aside 1.36 percent of its 13F equity portfolio to GRTS.

As aggregate interest increased, some big names have jumped into Gritstone Oncology, Inc. (NASDAQ:GRTS) headfirst. Renaissance Technologies, created the largest position in Gritstone Oncology, Inc. (NASDAQ:GRTS). Renaissance Technologies had $0.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0 million position during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Gritstone Oncology, Inc. (NASDAQ:GRTS). We will take a look at AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), Maui Land & Pineapple Company, Inc. (NYSE:MLP), HOOKIPA Pharma Inc. (NASDAQ:HOOK), and Jumei International Holding Ltd (NYSE:JMEI). This group of stocks’ market values resemble GRTS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMAG 12 92458 0
MLP 1 1704 -1
HOOK 6 34967 -1
JMEI 2 836 -2
Average 5.25 32491 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $44 million in GRTS’s case. AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) is the most popular stock in this table. On the other hand Maui Land & Pineapple Company, Inc. (NYSE:MLP) is the least popular one with only 1 bullish hedge fund positions. Gritstone Oncology, Inc. (NASDAQ:GRTS) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately GRTS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GRTS were disappointed as the stock returned 19.2% during the same time period 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 many of these stocks already outperformed the market so far this year.

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