Hedge Funds Have Never Been This Bullish On MyoKardia, Inc. (MYOK)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded MyoKardia, Inc. (NASDAQ:MYOK) and determine whether the smart money was really smart about this stock.

MyoKardia, Inc. (NASDAQ:MYOK) investors should be aware of an increase in activity from the world’s largest hedge funds recently. MyoKardia, Inc. (NASDAQ:MYOK) was in 45 hedge funds’ portfolios at the end of June. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 33 hedge funds in our database with MYOK positions at the end of the first quarter. Our calculations also showed that MYOK 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 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.

Joseph Edelman of Perceptive Advisors

Joseph Edelman of Perceptive Advisors

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. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to go over the latest hedge fund action surrounding MyoKardia, Inc. (NASDAQ:MYOK).

Hedge fund activity in MyoKardia, Inc. (NASDAQ:MYOK)

At second quarter’s end, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in MYOK a year ago. 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 MyoKardia, Inc. (NASDAQ:MYOK) was held by Baker Bros. Advisors, which reported holding $305.7 million worth of stock at the end of September. It was followed by Avoro Capital Advisors (venBio Select Advisor) with a $181.6 million position. Other investors bullish on the company included Perceptive Advisors, D E Shaw, and Farallon Capital. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to MyoKardia, Inc. (NASDAQ:MYOK), around 34.31% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, designating 6.04 percent of its 13F equity portfolio to MYOK.

With a general bullishness amongst the heavyweights, some big names have jumped into MyoKardia, Inc. (NASDAQ:MYOK) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in MyoKardia, Inc. (NASDAQ:MYOK). Marshall Wace LLP had $13.7 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also initiated a $9.9 million position during the quarter. The following funds were also among the new MYOK investors: Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Principal Global Investors’s Columbus Circle Investors.

Let’s go over hedge fund activity in other stocks similar to MyoKardia, Inc. (NASDAQ:MYOK). These stocks are TCF Financial Corporation (NASDAQ:TCF), Western Midstream Partners, LP (NYSE:WES), Life Storage, Inc. (NYSE:LSI), The Descartes Systems Group Inc (NASDAQ:DSGX), Vertiv Holdings Co (NYSE:VRT), MDU Resources Group Inc (NYSE:MDU), and MSA Safety Incorporated (NYSE:MSA). This group of stocks’ market caps are similar to MYOK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TCF 14 85082 -5
WES 11 79571 -1
LSI 19 137533 -3
DSGX 10 196345 0
VRT 40 747088 1
MDU 21 182406 -4
MSA 26 71378 15
Average 20.1 214200 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $1361 million in MYOK’s case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand The Descartes Systems Group Inc (NASDAQ:DSGX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks MyoKardia, Inc. (NASDAQ:MYOK) is more popular among hedge funds. Our overall hedge fund sentiment score for MYOK 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 gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately MYOK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MYOK were disappointed as the stock returned 13.3% since the end of the second quarter 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.