The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded TherapeuticsMD Inc (NASDAQ:TXMD) based on those filings.
Is TherapeuticsMD Inc (NASDAQ:TXMD) a cheap investment today? Money managers are in a pessimistic mood. The number of long hedge fund positions dropped by 9 in recent months. Our calculations also showed that TXMD 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). TXMD was in 9 hedge funds’ portfolios at the end of the first quarter of 2020. There were 18 hedge funds in our database with TXMD positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the latest hedge fund action encompassing TherapeuticsMD Inc (NASDAQ:TXMD).
How have hedgies been trading TherapeuticsMD Inc (NASDAQ:TXMD)?
Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in TXMD over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Rubric Capital Management held the most valuable stake in TherapeuticsMD Inc (NASDAQ:TXMD), which was worth $10.2 million at the end of the third quarter. On the second spot was GMT Capital which amassed $5.4 million worth of shares. Citadel Investment Group, Perceptive Advisors, and Carlson Capital 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 Rubric Capital Management allocated the biggest weight to TherapeuticsMD Inc (NASDAQ:TXMD), around 1.61% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, earmarking 0.31 percent of its 13F equity portfolio to TXMD.
Because TherapeuticsMD Inc (NASDAQ:TXMD) has faced declining sentiment from the smart money, logic holds that there were a few fund managers that elected to cut their full holdings by the end of the first quarter. Interestingly, James E. Flynn’s Deerfield Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $5.4 million in stock. David Brown’s fund, Hawk Ridge Management, also said goodbye to its stock, about $4.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 9 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks similar to TherapeuticsMD Inc (NASDAQ:TXMD). These stocks are Pivotal Investment Corporation II (NYSE:PIC), Oportun Financial Corporation (NASDAQ:OPRT), Calithera Biosciences Inc (NASDAQ:CALA), and Peoples Financial Services Corp. (NASDAQ:PFIS). This group of stocks’ market valuations match TXMD’s market valuation.
|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 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $20 million in TXMD’s case. Pivotal Investment Corporation II (NYSE:PIC) is the most popular stock in this table. On the other hand Peoples Financial Services Corp. (NASDAQ:PFIS) is the least popular one with only 1 bullish hedge fund positions. TherapeuticsMD Inc (NASDAQ:TXMD) 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 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately TXMD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TXMD were disappointed as the stock returned 12.3% 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.
Disclosure: None. This article was originally published at Insider Monkey.