While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Eidos Therapeutics, Inc. (NASDAQ:EIDX).
Is EIDX a good stock to buy now? Eidos Therapeutics, Inc. (NASDAQ:EIDX) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 20. EIDX shareholders have witnessed a decrease in support from the world’s most elite money managers recently. There were 17 hedge funds in our database with EIDX holdings at the end of June. Our calculations also showed that EIDX 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.
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 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. Now let’s take a gander at the key hedge fund action surrounding Eidos Therapeutics, Inc. (NASDAQ:EIDX).
Do Hedge Funds Think EIDX Is A Good Stock To Buy Now?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in EIDX over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Eidos Therapeutics, Inc. (NASDAQ:EIDX) was held by RA Capital Management, which reported holding $109.3 million worth of stock at the end of September. It was followed by Cormorant Asset Management with a $50.2 million position. Other investors bullish on the company included Perceptive Advisors, Redmile Group, and Opaleye Management. In terms of the portfolio weights assigned to each position Opaleye Management allocated the biggest weight to Eidos Therapeutics, Inc. (NASDAQ:EIDX), around 3.12% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, dishing out 2 percent of its 13F equity portfolio to EIDX.
Judging by the fact that Eidos Therapeutics, Inc. (NASDAQ:EIDX) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedgies that elected to cut their positions entirely in the third quarter. At the top of the heap, Israel Englander’s Millennium Management sold off the biggest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $1.9 million in stock. Andre F. Perold’s fund, HighVista Strategies, also dumped its stock, about $0.5 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 4 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Eidos Therapeutics, Inc. (NASDAQ:EIDX). These stocks are Main Street Capital Corporation (NYSE:MAIN), Allegiant Travel Company (NASDAQ:ALGT), Cimpress plc (NASDAQ:CMPR), Inovio Pharmaceuticals Inc (NYSE:INO), Moelis & Company (NYSE:MC), Associated Banc Corp (NYSE:ASB), and Integer Holdings Corporation (NYSE:ITGR). All of these stocks’ market caps match EIDX’s market cap.
|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 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $254 million in EIDX’s case. Cimpress plc (NASDAQ:CMPR) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 4 bullish hedge fund positions. Eidos Therapeutics, Inc. (NASDAQ:EIDX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EIDX is 41.9. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on EIDX as the stock returned 106.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.