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Hedge Funds Dropped The Ball On Neoleukin Therapeutics, Inc. (NLTX)

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Neoleukin Therapeutics, Inc. (NASDAQ:NLTX).

Is Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) the right pick for your portfolio? The smart money is becoming more confident. The number of bullish hedge fund positions improved by 1 recently. Our calculations also showed that NLTX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the fresh hedge fund action encompassing Neoleukin Therapeutics, Inc. (NASDAQ:NLTX).

How have hedgies been trading Neoleukin Therapeutics, Inc. (NASDAQ:NLTX)?

Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NLTX over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is NLTX A Good Stock To Buy?

The largest stake in Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) was held by Baker Bros. Advisors, which reported holding $32.2 million worth of stock at the end of September. It was followed by EcoR1 Capital with a $6.5 million position. Other investors bullish on the company included Opaleye Management, Renaissance Technologies, and Millennium Management. In terms of the portfolio weights assigned to each position Opaleye Management allocated the biggest weight to Neoleukin Therapeutics, Inc. (NASDAQ:NLTX), around 1.03% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, dishing out 0.82 percent of its 13F equity portfolio to NLTX.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Opaleye Management, managed by James A. Silverman, created the most valuable position in Neoleukin Therapeutics, Inc. (NASDAQ:NLTX). Opaleye Management had $2.8 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $1.2 million position during the quarter. The only other fund with a brand new NLTX position is Richard Driehaus’s Driehaus Capital.

Let’s also examine hedge fund activity in other stocks similar to Neoleukin Therapeutics, Inc. (NASDAQ:NLTX). These stocks are Guaranty Federal Bancshares, Inc. (NASDAQ:GFED), Chembio Diagnostics Inc (NASDAQ:CEMI), Steel Connect, Inc. (NASDAQ:STCN), and HC2 Holdings Inc (NYSE:HCHC). All of these stocks’ market caps are closest to NLTX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GFED 2 3370 0
CEMI 2 11357 -2
STCN 5 37813 1
HCHC 14 4588 -1
Average 5.75 14282 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $46 million in NLTX’s case. HC2 Holdings Inc (NYSE:HCHC) is the most popular stock in this table. On the other hand Guaranty Federal Bancshares, Inc. (NASDAQ:GFED) is the least popular one with only 2 bullish hedge fund positions. Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on NLTX as the stock returned 95.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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