Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Gritstone Oncology, Inc. (NASDAQ:GRTS) in this article.
Gritstone Oncology, Inc. (NASDAQ:GRTS) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 15. GRTS has seen a decrease in activity from the world’s largest hedge funds of late. There were 12 hedge funds in our database with GRTS positions at the end of the second quarter. Our calculations also showed that GRTS isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing Gritstone Oncology, Inc. (NASDAQ:GRTS).
Hedge fund activity in Gritstone Oncology, Inc. (NASDAQ:GRTS)
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -42% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GRTS over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Redmile Group held the most valuable stake in Gritstone Oncology, Inc. (NASDAQ:GRTS), which was worth $8.1 million at the end of the third quarter. On the second spot was Frazier Healthcare Partners which amassed $5.5 million worth of shares. Renaissance Technologies, D E Shaw, and Millennium Management 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 Frazier Healthcare Partners allocated the biggest weight to Gritstone Oncology, Inc. (NASDAQ:GRTS), around 0.49% of its 13F portfolio. Redmile Group is also relatively very bullish on the stock, earmarking 0.15 percent of its 13F equity portfolio to GRTS.
Seeing as Gritstone Oncology, Inc. (NASDAQ:GRTS) has witnessed falling interest from the smart money, it’s easy to see that there lies a certain “tier” of funds that elected to cut their entire stakes in the third quarter. It’s worth mentioning that Eli Casdin’s Casdin Capital dropped the largest stake of all the hedgies watched by Insider Monkey, worth close to $12.3 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also dumped its stock, about $1.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 5 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Gritstone Oncology, Inc. (NASDAQ:GRTS). We will take a look at Arlington Asset Investment Corp (NYSE:AI), Cogent Biosciences (NASDAQ:UMRX), Almaden Minerals Ltd. (NYSE:AAU), Luokung Technology Corp (NASDAQ:LKCO), New Home Company Inc (NYSE:NWHM), Siebert Financial Corp. (NASDAQ:SIEB), and Ohio Valley Banc Corp. (NASDAQ:OVBC). This group of stocks’ market valuations are similar to GRTS’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $9 million. That figure was $15 million in GRTS’s case. Cogent Biosciences (NASDAQ:UMRX) is the most popular stock in this table. On the other hand Luokung Technology Corp (NASDAQ:LKCO) is the least popular one with only 1 bullish hedge fund positions. Gritstone Oncology, Inc. (NASDAQ:GRTS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GRTS is 47.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on GRTS as the stock returned 11.7% since the end of Q3 (through 12/2) 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.