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Hedge Funds Aren’t Done Buying Kadmon Holdings, Inc. (KDMN)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Kadmon Holdings, Inc. (NYSE:KDMN) based on that data.

Is Kadmon Holdings, Inc. (NYSE:KDMN) a good stock to buy now? Investors who are in the know are becoming hopeful. The number of long hedge fund positions moved up by 3 recently. Our calculations also showed that KDMN 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). KDMN was in 28 hedge funds’ portfolios at the end of the first quarter of 2020. There were 25 hedge funds in our database with KDMN positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are a large number of formulas stock market investors employ to value publicly traded companies. A pair of the less utilized formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top investment managers can trounce their index-focused peers by a superb margin (see the details here).

Michael Castor of Sio Capital

Michael Castor of Sio Capital

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 trades like this one as well as this tiny lithium play. 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 let’s take a glance at the latest hedge fund action regarding Kadmon Holdings, Inc. (NYSE:KDMN).

How are hedge funds trading Kadmon Holdings, Inc. (NYSE:KDMN)?

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KDMN over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, Perceptive Advisors held the most valuable stake in Kadmon Holdings, Inc. (NYSE:KDMN), which was worth $65.8 million at the end of the third quarter. On the second spot was Consonance Capital Management which amassed $65.4 million worth of shares. Vivo Capital, Third Point, and Citadel Investment Group 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 Consonance Capital Management allocated the biggest weight to Kadmon Holdings, Inc. (NYSE:KDMN), around 4.87% of its 13F portfolio. Acuta Capital Partners is also relatively very bullish on the stock, earmarking 4.79 percent of its 13F equity portfolio to KDMN.

Consequently, key money managers have been driving this bullishness. Acuta Capital Partners, managed by Manfred Yu, assembled the most valuable position in Kadmon Holdings, Inc. (NYSE:KDMN). Acuta Capital Partners had $9.9 million invested in the company at the end of the quarter. Neil Shahrestani’s Ikarian Capital also made a $5.5 million investment in the stock during the quarter. The following funds were also among the new KDMN investors: Michael Castor’s Sio Capital, Vishal Saluja and Pham Quang’s Endurant Capital Management, and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks similar to Kadmon Holdings, Inc. (NYSE:KDMN). We will take a look at Systemax Inc. (NYSE:SYX), Central Securities Corporation (NYSE:CET), Hyster-Yale Materials Handling Inc (NYSE:HY), and Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM). This group of stocks’ market valuations match KDMN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYX 11 14658 -2
CET 2 11637 1
HY 10 27150 1
RYTM 9 186440 -1
Average 8 59971 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $307 million in KDMN’s case. Systemax Inc. (NYSE:SYX) is the most popular stock in this table. On the other hand Central Securities Corporation (NYSE:CET) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Kadmon Holdings, Inc. (NYSE:KDMN) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately KDMN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KDMN were disappointed as the stock returned 6% during the second quarter (through the end of May) 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.

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