Hedge Funds Are Selling ProQR Therapeutics NV (PRQR)

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of ProQR Therapeutics NV (NASDAQ:PRQR) based on that data.

Is ProQR Therapeutics NV (NASDAQ:PRQR) a safe investment right now? The smart money was getting less optimistic. The number of bullish hedge fund positions were trimmed by 2 in recent months. ProQR Therapeutics NV (NASDAQ:PRQR) was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 14. Our calculations also showed that PRQR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 7 hedge funds in our database with PRQR holdings at the end of June.

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 66 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.

Nathan Fischel DAFNA Capital

Nathan Fischel of DAFNA Capital Management

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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we’re going to take a glance at the fresh hedge fund action regarding ProQR Therapeutics NV (NASDAQ:PRQR).

What does smart money think about ProQR Therapeutics NV (NASDAQ:PRQR)?

At third quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PRQR over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Adage Capital Management was the largest shareholder of ProQR Therapeutics NV (NASDAQ:PRQR), with a stake worth $21.8 million reported as of the end of September. Trailing Adage Capital Management was Aquilo Capital Management, which amassed a stake valued at $10.9 million. DAFNA Capital Management, Renaissance Technologies, and D E Shaw 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 DAFNA Capital Management allocated the biggest weight to ProQR Therapeutics NV (NASDAQ:PRQR), around 1.93% of its 13F portfolio. Aquilo Capital Management is also relatively very bullish on the stock, designating 1.16 percent of its 13F equity portfolio to PRQR.

Judging by the fact that ProQR Therapeutics NV (NASDAQ:PRQR) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds who were dropping their entire stakes by the end of the third quarter. Intriguingly, Sahm Adrangi’s Kerrisdale Capital cut the largest position of the 750 funds tracked by Insider Monkey, worth close to $2.8 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dumped its stock, about $0.1 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to ProQR Therapeutics NV (NASDAQ:PRQR). These stocks are The Marcus Corporation (NYSE:MCS), Greenlight Capital Re, Ltd. (NASDAQ:GLRE), Preformed Line Products Company (NASDAQ:PLPC), Sierra Metals Inc. (NYSE:SMTS), Gold Resource Corporation (NYSE:GORO), American Renal Associates Holdings, Inc (NYSE:ARA), and TELA Bio, Inc. (NASDAQ:TELA). This group of stocks’ market values are closest to PRQR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCS 13 14607 0
GLRE 4 1004 -2
PLPC 5 20457 -2
SMTS 3 1279 1
GORO 4 1738 -3
ARA 5 130082 0
TELA 7 75777 -2
Average 5.9 34992 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $39 million in PRQR’s case. The Marcus Corporation (NYSE:MCS) is the most popular stock in this table. On the other hand Sierra Metals Inc. (NYSE:SMTS) is the least popular one with only 3 bullish hedge fund positions. ProQR Therapeutics NV (NASDAQ:PRQR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PRQR is 23.7. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately PRQR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PRQR investors were disappointed as the stock returned -14.2% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.

Follow Proqr Therapeutics N.v. (NASDAQ:PRQR)

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