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Hedge Funds Aren’t Done Buying Momenta Pharmaceuticals, Inc. (MNTA)

In this article we will take a look at whether hedge funds think Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) was in 36 hedge funds’ portfolios at the end of the first quarter of 2020. MNTA has experienced an increase in support from the world’s most elite money managers lately. There were 33 hedge funds in our database with MNTA positions at the end of the previous quarter. Our calculations also showed that MNTA 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.

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 51 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.

Kamran Moghtaderi of Eversept Partners

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. 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. With all of this in mind let’s take a look at the new hedge fund action surrounding Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA).

How have hedgies been trading Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)?

Heading into the second quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MNTA over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) was held by Redmile Group, which reported holding $140.8 million worth of stock at the end of September. It was followed by RA Capital Management with a $68.9 million position. Other investors bullish on the company included Maverick Capital, Adage Capital Management, and Camber Capital Management. In terms of the portfolio weights assigned to each position Redmile Group allocated the biggest weight to Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), around 3.95% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, dishing out 3.48 percent of its 13F equity portfolio to MNTA.

As aggregate interest increased, key money managers were leading the bulls’ herd. Maverick Capital, managed by Lee Ainslie, established the largest position in Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). Maverick Capital had $59.1 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $57.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Greg Martinez’s Parkman Healthcare Partners, and Kamran Moghtaderi’s Eversept Partners.

Let’s check out hedge fund activity in other stocks similar to Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). These stocks are Manhattan Associates, Inc. (NASDAQ:MANH), LG Display Co Ltd. (NYSE:LPL), Nevro Corp (NYSE:NVRO), and B2Gold Corp (NYSE:BTG). This group of stocks’ market values match MNTA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MANH 20 199741 -4
LPL 4 4761 1
NVRO 31 694464 -2
BTG 19 228596 2
Average 18.5 281891 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $667 million in MNTA’s case. Nevro Corp (NYSE:NVRO) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) 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 MNTA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MNTA were disappointed as the stock returned 15.7% 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.