Hedge Funds Are Selling Sesen Bio, Inc. (SESN)

In this article you are going to find out whether hedge funds think Sesen Bio, Inc. (NASDAQ:SESN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Sesen Bio, Inc. (NASDAQ:SESN) has seen a decrease in hedge fund interest lately. Sesen Bio, Inc. (NASDAQ:SESN) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 13. Our calculations also showed that SESN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to analyze the recent hedge fund action encompassing Sesen Bio, Inc. (NASDAQ:SESN).

Do Hedge Funds Think SESN Is A Good Stock To Buy Now?

At the end of June, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the first quarter of 2020. On the other hand, there were a total of 5 hedge funds with a bullish position in SESN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), holds the largest position in Sesen Bio, Inc. (NASDAQ:SESN). Schonfeld Strategic Advisors has a $17.7 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $12.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions contain Israel Englander’s Millennium Management, Renaissance Technologies and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Schonfeld Strategic Advisors allocated the biggest weight to Sesen Bio, Inc. (NASDAQ:SESN), around 0.17% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to SESN.

Because Sesen Bio, Inc. (NASDAQ:SESN) has experienced a decline in interest from hedge fund managers, we can see that there is a sect of hedgies that slashed their full holdings last quarter. At the top of the heap, Mark Kingdon’s Kingdon Capital said goodbye to the largest stake of the 750 funds monitored by Insider Monkey, valued at close to $3.4 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dropped its stock, about $0.7 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Sesen Bio, Inc. (NASDAQ:SESN). We will take a look at Pzena Investment Management Inc (NYSE:PZN), Vital Farms, Inc. (NASDAQ:VITL), Unitil Corporation (NYSE:UTL), Magic Software Enterprises Ltd. (NASDAQ:MGIC), Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), and Genco Shipping & Trading Limited (NYSE:GNK). This group of stocks’ market caps are closest to SESN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $47 million in SESN’s case. Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) is the most popular stock in this table. On the other hand Unitil Corporation (NYSE:UTL) is the least popular one with only 4 bullish hedge fund positions. Sesen Bio, Inc. (NASDAQ:SESN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SESN is 45.8. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately SESN wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SESN investors were disappointed as the stock returned -82.2% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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