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Hedge Funds Have Never Been This Bullish On Merus N.V. (MRUS)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Merus N.V. (NASDAQ:MRUS).

Merus N.V. (NASDAQ:MRUS) was in 8 hedge funds’ portfolios at the end of the third quarter of 2019. MRUS shareholders have witnessed an increase in hedge fund sentiment of late. There were 7 hedge funds in our database with MRUS positions at the end of the previous quarter. Our calculations also showed that MRUS 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.

According to most investors, hedge funds are perceived as worthless, old investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at present, We choose to focus on the moguls of this club, approximately 750 funds. These hedge fund managers orchestrate the majority of all hedge funds’ total capital, and by keeping an eye on their matchless stock picks, Insider Monkey has unsheathed various investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Oleg Nodelman EcoR1 Capital

Oleg Nodelman of EcoR1 Capital

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. We’re going to go over the new hedge fund action encompassing Merus N.V. (NASDAQ:MRUS).

How have hedgies been trading Merus N.V. (NASDAQ:MRUS)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MRUS over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Biotechnology Value Fund, managed by Mark Lampert, holds the biggest position in Merus N.V. (NASDAQ:MRUS). Biotechnology Value Fund has a $82.7 million position in the stock, comprising 8.7% of its 13F portfolio. The second largest stake is held by Baker Bros. Advisors, managed by Julian Baker and Felix Baker, which holds a $20.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism contain Marc Schneidman’s Aquilo Capital Management, Richard Driehaus’s Driehaus Capital and Oleg Nodelman’s EcoR1 Capital. In terms of the portfolio weights assigned to each position Aquilo Capital Management allocated the biggest weight to Merus N.V. (NASDAQ:MRUS), around 13.04% of its 13F portfolio. Biotechnology Value Fund is also relatively very bullish on the stock, dishing out 8.69 percent of its 13F equity portfolio to MRUS.

As industrywide interest jumped, key money managers have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, assembled the most valuable position in Merus N.V. (NASDAQ:MRUS). Driehaus Capital had $11.1 million invested in the company at the end of the quarter. Oleg Nodelman’s EcoR1 Capital also initiated a $3 million position during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Merus N.V. (NASDAQ:MRUS). These stocks are Arcus Biosciences, Inc. (NYSE:RCUS), SIGA Technologies Inc. (NASDAQ:SIGA), Cutera, Inc. (NASDAQ:CUTR), and Intra-Cellular Therapies Inc (NASDAQ:ITCI). All of these stocks’ market caps resemble MRUS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RCUS 11 52740 -3
SIGA 12 27474 2
CUTR 13 97437 3
ITCI 11 33556 0
Average 11.75 52802 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $139 million in MRUS’s case. Cutera, Inc. (NASDAQ:CUTR) is the most popular stock in this table. On the other hand Arcus Biosciences, Inc. (NYSE:RCUS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Merus N.V. (NASDAQ:MRUS) is even less popular than RCUS. Hedge funds dodged a bullet by taking a bearish stance towards MRUS. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MRUS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MRUS investors were disappointed as the stock returned -7.5% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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

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