How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) and determine whether hedge funds had an edge regarding this stock.
Is Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) a worthy investment right now? Prominent investors were betting on the stock. The number of bullish hedge fund positions advanced by 6 lately. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) was in 42 hedge funds’ portfolios at the end of June. The all time high for this statistics is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MNTA isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
In the financial world there are dozens of methods stock market investors have at their disposal to analyze publicly traded companies. Some of the most underrated methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best fund managers can beat the market by a significant amount (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind we’re going to take a gander at the fresh hedge fund action surrounding Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA).
How are hedge funds trading Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA)?
Heading into the third quarter of 2020, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in MNTA over the last 20 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Redmile Group was the largest shareholder of Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), with a stake worth $156.5 million reported as of the end of September. Trailing Redmile Group was RA Capital Management, which amassed a stake valued at $84.2 million. Maverick Capital, Adage Capital Management, 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 Ghost Tree Capital allocated the biggest weight to Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), around 3.38% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, designating 3.21 percent of its 13F equity portfolio to MNTA.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, created the most valuable position in Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). Viking Global had $31.5 million invested in the company at the end of the quarter. Christopher James’s Partner Fund Management also initiated a $19.3 million position during the quarter. The other funds with new positions in the stock are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Bhagwan Jay Rao’s Integral Health Asset Management, and John W. Rende’s Copernicus Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA). These stocks are Janus Henderson Group plc (NYSE:JHG), Equity Commonwealth (NYSE:EQC), ICL Group Ltd. (NYSE:ICL), Graphic Packaging Holding Company (NYSE:GPK), ChemoCentryx Inc (NASDAQ:CCXI), Amicus Therapeutics, Inc. (NASDAQ:FOLD), and Highwoods Properties Inc (NYSE:HIW). This group of stocks’ market caps resemble MNTA’s market cap.
|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 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $410 million. That figure was $733 million in MNTA’s case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is more popular among hedge funds. Our overall hedge fund sentiment score for MNTA is 90. 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. 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 returned 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on MNTA as the stock returned 56.8% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.