We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY).
Is HRMY a good stock to buy now? Hedge funds were in an optimistic mood. The number of bullish hedge fund bets improved by 10 in recent months. Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) was in 10 hedge funds’ portfolios at the end of September. Our calculations also showed that HRMY 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 analyze the latest hedge fund action regarding Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY).
Do Hedge Funds Think HRMY Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10 from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HRMY over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Vivo Capital was the largest shareholder of Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY), with a stake worth $153.7 million reported as of the end of September. Trailing Vivo Capital was Perceptive Advisors, which amassed a stake valued at $14.8 million. Millennium Management, Baker Bros. Advisors, and Logos 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 Vivo Capital allocated the biggest weight to Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY), around 8.88% of its 13F portfolio. Logos Capital is also relatively very bullish on the stock, setting aside 1.23 percent of its 13F equity portfolio to HRMY.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Vivo Capital, managed by Albert Cha and Frank Kung, initiated the most valuable position in Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY). Vivo Capital had $153.7 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also initiated a $14.8 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Julian Baker and Felix Baker’s Baker Bros. Advisors, and Arsani William’s Logos Capital.
Let’s go over hedge fund activity in other stocks similar to Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY). We will take a look at Federated Hermes, Inc. (NYSE:FHI), Guangshen Railway Co. Ltd (NYSE:GSH), PagerDuty, Inc. (NYSE:PD), Greif, Inc. (NYSE:GEF), Beacon Roofing Supply, Inc. (NASDAQ:BECN), Sumo Logic, Inc. (NASDAQ:SUMO), and California Water Service Group (NYSE:CWT). This group of stocks’ market caps resemble HRMY’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 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $215 million in HRMY’s case. Federated Hermes, Inc. (NYSE:FHI) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 bullish hedge fund positions. Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HRMY is 35.7. 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 HRMY as the stock returned 28.3% 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.