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Hedge Funds Keep Buying Twist Bioscience Corporation (TWST)

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 Twist Bioscience Corporation (NASDAQ:TWST).

Twist Bioscience Corporation (NASDAQ:TWST) investors should be aware of an increase in enthusiasm from smart money in recent months. TWST was in 16 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with TWST holdings at the end of the previous quarter. Our calculations also showed that TWST 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Sander Gerber of Hudson Bay Capital

Sander Gerber of Hudson Bay Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the fresh hedge fund action encompassing Twist Bioscience Corporation (NASDAQ:TWST).

What does smart money think about Twist Bioscience Corporation (NASDAQ:TWST)?

At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TWST over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TWST A Good Stock To Buy?

More specifically, Tao Capital was the largest shareholder of Twist Bioscience Corporation (NASDAQ:TWST), with a stake worth $44.5 million reported as of the end of September. Trailing Tao Capital was Casdin Capital, which amassed a stake valued at $30.6 million. Millennium Management, Cormorant Asset Management, and Alyeska Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tao Capital allocated the biggest weight to Twist Bioscience Corporation (NASDAQ:TWST), around 20.89% of its 13F portfolio. Pinz Capital is also relatively very bullish on the stock, designating 6.42 percent of its 13F equity portfolio to TWST.

As one would reasonably expect, key money managers have jumped into Twist Bioscience Corporation (NASDAQ:TWST) headfirst. Redmile Group, managed by Jeremy Green, initiated the most outsized position in Twist Bioscience Corporation (NASDAQ:TWST). Redmile Group had $18 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $12.7 million investment in the stock during the quarter. The following funds were also among the new TWST investors: Efrem Kamen’s Pura Vida Investments, Matthew L Pinz’s Pinz Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Twist Bioscience Corporation (NASDAQ:TWST) but similarly valued. These stocks are Knowles Corp (NYSE:KN), Northwest Bancshares, Inc. (NASDAQ:NWBI), Cardiovascular Systems Inc (NASDAQ:CSII), and USANA Health Sciences, Inc. (NYSE:USNA). This group of stocks’ market values are similar to TWST’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KN 20 205594 -9
NWBI 14 20443 -5
CSII 12 86525 -4
USNA 13 133207 1
Average 14.75 111442 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $216 million in TWST’s case. Knowles Corp (NYSE:KN) is the most popular stock in this table. On the other hand Cardiovascular Systems Inc (NASDAQ:CSII) is the least popular one with only 12 bullish hedge fund positions. Twist Bioscience Corporation (NASDAQ:TWST) 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on TWST as the stock returned 39.2% in Q2 (through June 25th) 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.