Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 20% in 2019 (through September 30th). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of 24% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like G1 Therapeutics, Inc. (NASDAQ:GTHX).
G1 Therapeutics, Inc. (NASDAQ:GTHX) shareholders have witnessed a decrease in enthusiasm from smart money of late. GTHX was in 10 hedge funds’ portfolios at the end of the second quarter of 2019. There were 11 hedge funds in our database with GTHX holdings at the end of the previous quarter. Our calculations also showed that GTHX isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most shareholders, hedge funds are perceived as worthless, old financial tools of yesteryear. While there are greater than 8000 funds in operation today, We choose to focus on the top tier of this club, about 750 funds. These hedge fund managers command most of all hedge funds’ total capital, and by watching their matchless equity investments, Insider Monkey has spotted a few investment strategies that have historically outperformed the market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the fresh hedge fund action encompassing G1 Therapeutics, Inc. (NASDAQ:GTHX).
What does smart money think about G1 Therapeutics, Inc. (NASDAQ:GTHX)?
At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in GTHX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Peter Kolchinsky’s RA Capital Management has the number one position in G1 Therapeutics, Inc. (NASDAQ:GTHX), worth close to $14.8 million, accounting for 0.8% of its total 13F portfolio. On RA Capital Management’s heels is Redmile Group, managed by Jeremy Green, which holds a $9 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Kevin C. Tang’s Tang Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP and Israel Englander’s Millennium Management.
Since G1 Therapeutics, Inc. (NASDAQ:GTHX) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedgies that slashed their entire stakes last quarter. Interestingly, Renaissance Technologies dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising close to $1.2 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund dropped about $0.4 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as G1 Therapeutics, Inc. (NASDAQ:GTHX) but similarly valued. We will take a look at Criteo SA (NASDAQ:CRTO), Neenah, Inc. (NYSE:NP), Presidio, Inc. (NASDAQ:PSDO), and FB Financial Corporation (NYSE:FBK). This group of stocks’ market values are closest to GTHX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRTO | 9 | 150438 | 0 |
| NP | 7 | 11350 | 0 |
| PSDO | 19 | 33607 | -6 |
| FBK | 4 | 89082 | -1 |
| Average | 9.75 | 71119 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $47 million in GTHX’s case. Presidio, Inc. (NASDAQ:PSDO) is the most popular stock in this table. On the other hand FB Financial Corporation (NYSE:FBK) is the least popular one with only 4 bullish hedge fund positions. G1 Therapeutics, Inc. (NASDAQ:GTHX) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GTHX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GTHX were disappointed as the stock returned -25.7% during the third 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 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.
