Is Gemini Therapeutics, Inc. (GMTX) A Good Stock To Buy?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Gemini Therapeutics, Inc. (NASDAQ:GMTX) changed recently.

Is GMTX a good stock to buy? Gemini Therapeutics, Inc. (NASDAQ:GMTX) has seen a decrease in hedge fund interest of late. Gemini Therapeutics, Inc. (NASDAQ:GMTX) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 18. There were 18 hedge funds in our database with GMTX positions at the end of the fourth quarter. Our calculations also showed that GMTX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Phillip Gross of Adage Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Gemini Therapeutics, Inc. (NASDAQ:GMTX).

Do Hedge Funds Think GMTX Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the fourth quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in GMTX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, OrbiMed Advisors held the most valuable stake in Gemini Therapeutics, Inc. (NASDAQ:GMTX), which was worth $78.9 million at the end of the fourth quarter. On the second spot was Suvretta Capital Management which amassed $17.8 million worth of shares. Adage Capital Management, Opaleye Management, and Ikarian Capital 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 Opaleye Management allocated the biggest weight to Gemini Therapeutics, Inc. (NASDAQ:GMTX), around 1.61% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, earmarking 0.74 percent of its 13F equity portfolio to GMTX.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was OrbiMed Advisors).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Gemini Therapeutics, Inc. (NASDAQ:GMTX) but similarly valued. These stocks are DXP Enterprises Inc (NASDAQ:DXPE), Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), SunCoke Energy, Inc (NYSE:SXC), Valhi, Inc. (NYSE:VHI), Bank First Corp (NASDAQ:BFC), Genius Brands International, Inc. (NASDAQ:GNUS), and Aspen Aerogels Inc (NYSE:ASPN). All of these stocks’ market caps are closest to GMTX’s market cap.

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As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $179 million in GMTX’s case. SunCoke Energy, Inc (NYSE:SXC) is the most popular stock in this table. On the other hand Valhi, Inc. (NYSE:VHI) is the least popular one with only 4 bullish hedge fund positions. Gemini Therapeutics, Inc. (NASDAQ:GMTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GMTX is 68.4. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately GMTX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GMTX were disappointed as the stock returned -64.9% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.