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Hedge Funds Keep Buying Kadmon Holdings, Inc. (KDMN)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Kadmon Holdings, Inc. (NYSE:KDMN) and determine whether hedge funds skillfully traded this stock.

Kadmon Holdings, Inc. (NYSE:KDMN) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistics is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. KDMN has experienced an increase in hedge fund sentiment recently. There were 28 hedge funds in our database with KDMN positions at the end of the first quarter. Our calculations also showed that KDMN 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 today’s marketplace there are plenty of gauges stock market investors put to use to assess their stock investments. A couple of the most useful gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outperform the market by a solid margin (see the details here).

Third Point 2014 Q3 Investor Letter

Dan Loeb of Third Point

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. 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. Keeping this in mind let’s analyze the latest hedge fund action regarding Kadmon Holdings, Inc. (NYSE:KDMN).

What have hedge funds been doing with Kadmon Holdings, Inc. (NYSE:KDMN)?

At Q2’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in KDMN over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Joseph Edelman’s Perceptive Advisors has the most valuable position in Kadmon Holdings, Inc. (NYSE:KDMN), worth close to $80.4 million, corresponding to 1.3% of its total 13F portfolio. The second largest stake is held by Consonance Capital Management, managed by Mitchell Blutt, which holds a $80.4 million position; 4.8% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish contain Dan Loeb’s Third Point, Michael Rockefeller and KarláKroeker’s Woodline Partners and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Kadmon Holdings, Inc. (NYSE:KDMN), around 4.82% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, setting aside 1.96 percent of its 13F equity portfolio to KDMN.

Now, key money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in Kadmon Holdings, Inc. (NYSE:KDMN). Point72 Asset Management had $27.3 million invested in the company at the end of the quarter. Bihua Chen’s Cormorant Asset Management also made a $9.2 million investment in the stock during the quarter. The other funds with brand new KDMN positions are Renaissance Technologies, Greg Martinez’s Parkman Healthcare Partners, and Jeffrey Jay and David Kroin’s Great Point Partners.

Let’s check out hedge fund activity in other stocks similar to Kadmon Holdings, Inc. (NYSE:KDMN). These stocks are Celsius Holdings, Inc. (NASDAQ:CELH), Aprea Therapeutics, Inc. (NASDAQ:APRE), Krystal Biotech, Inc. (NASDAQ:KRYS), Enterprise Financial Services Corp (NASDAQ:EFSC), Linx S.A. (NYSE:LINX), First Commonwealth Financial Corporation (NYSE:FCF), and The Gorman-Rupp Company (NYSE:GRC). This group of stocks’ market caps resemble KDMN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CELH 10 24910 2
APRE 11 215236 5
KRYS 13 182877 4
EFSC 14 28260 6
LINX 3 15666 -2
FCF 15 25585 4
GRC 10 38334 2
Average 10.9 75838 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.9 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $383 million in KDMN’s case. First Commonwealth Financial Corporation (NYSE:FCF) is the most popular stock in this table. On the other hand Linx S.A. (NYSE:LINX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Kadmon Holdings, Inc. (NYSE:KDMN) is more popular among hedge funds. Our overall hedge fund sentiment score for KDMN is 86. 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Unfortunately KDMN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KDMN were disappointed as the stock returned -14.1% 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.