It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% 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’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Lantheus Holdings Inc (NASDAQ:LNTH).
Lantheus Holdings Inc (NASDAQ:LNTH) investors should pay attention to an increase in support from the world’s most elite money managers recently. LNTH was in 17 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with LNTH positions at the end of the previous quarter. Our calculations also showed that lnth isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a gander at the latest hedge fund action surrounding Lantheus Holdings Inc (NASDAQ:LNTH).
What have hedge funds been doing with Lantheus Holdings Inc (NASDAQ:LNTH)?
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in LNTH 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the number one position in Lantheus Holdings Inc (NASDAQ:LNTH). Renaissance Technologies has a $15.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Tamarack Capital Management, managed by Justin John Ferayorni, which holds a $15.3 million position; the fund has 6.2% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass William C. Martin’s Raging Capital Management, Cliff Asness’s AQR Capital Management and Chuck Royce’s Royce & Associates.
As one would reasonably expect, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the most outsized position in Lantheus Holdings Inc (NASDAQ:LNTH). Millennium Management had $1.6 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.2 million position during the quarter. The following funds were also among the new LNTH investors: Joel Greenblatt’s Gotham Asset Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s also examine hedge fund activity in other stocks similar to Lantheus Holdings Inc (NASDAQ:LNTH). We will take a look at Scholar Rock Holding Corporation (NASDAQ:SRRK), Eagle Pharmaceuticals Inc (NASDAQ:EGRX), Adaptimmune Therapeutics plc (NASDAQ:ADAP), and Pzena Investment Management Inc (NYSE:PZN). This group of stocks’ market caps match LNTH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRRK | 4 | 80044 | 0 |
| EGRX | 21 | 143787 | 2 |
| ADAP | 12 | 196466 | -1 |
| PZN | 5 | 14906 | 1 |
| Average | 10.5 | 108801 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $65 million in LNTH’s case. Eagle Pharmaceuticals Inc (NASDAQ:EGRX) is the most popular stock in this table. On the other hand Scholar Rock Holding Corporation (NASDAQ:SRRK) is the least popular one with only 4 bullish hedge fund positions. Lantheus Holdings Inc (NASDAQ:LNTH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on LNTH as the stock returned 54.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
