Hedge funds are known to underperform the bull markets but that’s not because they are terrible at stock picking. Hedge funds underperform because their net exposure in only 40-70% and they charge exorbitant fees. No one knows what the future holds and how market participants will react to the bountiful news that floods in each day. However, hedge funds’ consensus picks on average deliver market beating returns. For example the Standard and Poor’s 500 Total Return Index returned approximately 26% (including dividend payments) through November 22nd. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Interestingly, an average long/short hedge fund returned only a fraction of this value due to the hedges they implemented and the large fees they charged. If you pay attention to the actual hedge fund returns versus the returns of their long stock picks, you might believe that it is a waste of time to analyze hedge funds’ purchases. We know better. That’s why we scrutinize hedge fund sentiment before we invest in a stock like Yield10 Bioscience, Inc. (NASDAQ:YTEN).
Hedge fund interest in Yield10 Bioscience, Inc. (NASDAQ:YTEN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare YTEN to other stocks including Motif Bio plc (NASDAQ:MTFB), Trans World Entertainment Corporation (NASDAQ:TWMC), and Aethlon Medical, Inc. (NASDAQ:AEMD) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jim Simons of RENAISSANCE TECHNOLOGIES
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the key hedge fund action encompassing Yield10 Bioscience, Inc. (NASDAQ:YTEN).
How have hedgies been trading Yield10 Bioscience, Inc. (NASDAQ:YTEN)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in YTEN over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the most valuable position in Yield10 Bioscience, Inc. (NASDAQ:YTEN), worth close to $0.2 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Birchview Capital, managed by Matthew Strobeck, which holds a $0.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. In terms of the portfolio weights assigned to each position Birchview Capital allocated the biggest weight to Yield10 Bioscience, Inc. (NASDAQ:YTEN), around 0.04% of its portfolio. GMT Capital is also relatively very bullish on the stock, earmarking 0.0006 percent of its 13F equity portfolio to YTEN.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks similar to Yield10 Bioscience, Inc. (NASDAQ:YTEN). These stocks are Motif Bio plc (NASDAQ:MTFB), Trans World Entertainment Corporation (NASDAQ:TWMC), Aethlon Medical, Inc. (NASDAQ:AEMD), and Invivo Therapeutics Holdings Corp (NASDAQ:NVIV). All of these stocks’ market caps resemble YTEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTFB | 3 | 48 | 0 |
| TWMC | 1 | 206 | 0 |
| AEMD | 1 | 2 | 0 |
| NVIV | 1 | 241 | -1 |
| Average | 1.5 | 124 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $0 million in YTEN’s case. Motif Bio plc (NASDAQ:MTFB) is the most popular stock in this table. On the other hand Trans World Entertainment Corporation (NASDAQ:TWMC) is the least popular one with only 1 bullish hedge fund positions. Yield10 Bioscience, Inc. (NASDAQ:YTEN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately YTEN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on YTEN were disappointed as the stock returned -74% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
