Hedge Funds Have Never Been This Bullish On TCR2 Therapeutics Inc. (TCRR)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards TCR2 Therapeutics Inc. (NASDAQ:TCRR).

TCR2 Therapeutics Inc. (NASDAQ:TCRR) investors should be aware of an increase in hedge fund interest of late. TCRR was in 7 hedge funds’ portfolios at the end of the first quarter of 2020. There were 4 hedge funds in our database with TCRR holdings at the end of the previous quarter. Our calculations also showed that TCRR 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.

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.

Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

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 stocks recommended/scorned by legendary Bill Miller. 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 we’re going to take a gander at the new hedge fund action regarding TCR2 Therapeutics Inc. (NASDAQ:TCRR).

Hedge fund activity in TCR2 Therapeutics Inc. (NASDAQ:TCRR)

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 75% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in TCRR a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Redmile Group, managed by Jeremy Green, holds the number one position in TCR2 Therapeutics Inc. (NASDAQ:TCRR). Redmile Group has a $13.7 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund manager is Hillhouse Capital Management, managed by Lei Zhang, which holds a $2.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions encompass Nathan Fischel’s DAFNA Capital Management, Israel Englander’s Millennium Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Redmile Group allocated the biggest weight to TCR2 Therapeutics Inc. (NASDAQ:TCRR), around 0.38% of its 13F portfolio. Soleus Capital is also relatively very bullish on the stock, dishing out 0.28 percent of its 13F equity portfolio to TCRR.

With a general bullishness amongst the heavyweights, some big names have jumped into TCR2 Therapeutics Inc. (NASDAQ:TCRR) headfirst. DAFNA Capital Management, managed by Nathan Fischel, assembled the most outsized position in TCR2 Therapeutics Inc. (NASDAQ:TCRR). DAFNA Capital Management had $0.6 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.4 million investment in the stock during the quarter. The other funds with brand new TCRR positions are Guy Levy’s Soleus Capital and Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as TCR2 Therapeutics Inc. (NASDAQ:TCRR) but similarly valued. We will take a look at Ames National Corporation (NASDAQ:ATLO), BCB Bancorp, Inc. (NASDAQ:BCBP), Arlo Technologies, Inc. (NYSE:ARLO), and Kaleido BioSciences, Inc. (NASDAQ:KLDO). All of these stocks’ market caps match TCRR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATLO 4 16527 1
BCBP 6 17574 0
ARLO 10 15415 1
KLDO 3 5030 1
Average 5.75 13637 0.75

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 $18 million in TCRR’s case. Arlo Technologies, Inc. (NYSE:ARLO) is the most popular stock in this table. On the other hand Kaleido BioSciences, Inc. (NASDAQ:KLDO) is the least popular one with only 3 bullish hedge fund positions. TCR2 Therapeutics Inc. (NASDAQ:TCRR) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on TCRR as the stock returned 98.7% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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