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Hedge Funds Nibbling On resTORbio, Inc. (TORC)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of resTORbio, Inc. (NASDAQ:TORC) based on that data.

Is resTORbio, Inc. (NASDAQ:TORC) a buy, sell, or hold? Investors who are in the know are buying. The number of long hedge fund positions increased by 1 recently. Our calculations also showed that TORC 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’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.

Samuel Isaly Orbimed Advisors

Samuel Isaly of OrbiMed Advisors

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 let’s take a look at the new hedge fund action surrounding resTORbio, Inc. (NASDAQ:TORC).

How are hedge funds trading resTORbio, Inc. (NASDAQ:TORC)?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in TORC over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

More specifically, OrbiMed Advisors was the largest shareholder of resTORbio, Inc. (NASDAQ:TORC), with a stake worth $5 million reported as of the end of September. Trailing OrbiMed Advisors was Two Sigma Advisors, which amassed a stake valued at $0.3 million. Millennium Management, Algert Coldiron Investors, and Citadel 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 OrbiMed Advisors allocated the biggest weight to resTORbio, Inc. (NASDAQ:TORC), around 0.08% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to TORC.

As industrywide interest jumped, some big names were leading the bulls’ herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the largest position in resTORbio, Inc. (NASDAQ:TORC). Two Sigma Advisors had $0.3 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.1 million position during the quarter. The only other fund with a new position in the stock is Ken Griffin’s Citadel Investment Group.

Let’s now review hedge fund activity in other stocks similar to resTORbio, Inc. (NASDAQ:TORC). We will take a look at VIVUS, Inc. (NASDAQ:VVUS), The National Security Group, Inc. (NASDAQ:NSEC), Profire Energy, Inc. (NASDAQ:PFIE), and Neos Therapeutics Inc (NASDAQ:NEOS). This group of stocks’ market values resemble TORC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VVUS 2 1582 1
NSEC 1 153 0
PFIE 3 3054 -3
NEOS 10 9798 3
Average 4 3647 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $5 million in TORC’s case. Neos Therapeutics Inc (NASDAQ:NEOS) is the most popular stock in this table. On the other hand The National Security Group, Inc. (NASDAQ:NSEC) is the least popular one with only 1 bullish hedge fund positions. resTORbio, Inc. (NASDAQ:TORC) 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 TORC as the stock returned 118.4% 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.