Is KOD A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Kodiak Sciences Inc (NASDAQ:KOD) based on that data.

Is KOD a good stock to buy now? Hedge fund interest in Kodiak Sciences Inc (NASDAQ:KOD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that KOD 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Camping World Holdings, Inc. (NYSE:CWH), Alkermes Plc (NASDAQ:ALKS), and Tripadvisor Inc (NASDAQ:TRIP) to gather more data points.

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.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

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 we’re going to take a look at the recent hedge fund action encompassing Kodiak Sciences Inc (NASDAQ:KOD).

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

At the end of September, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in KOD a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is KOD A Good Stock To Buy?

The largest stake in Kodiak Sciences Inc (NASDAQ:KOD) was held by Baker Bros. Advisors, which reported holding $731.4 million worth of stock at the end of September. It was followed by Perceptive Advisors with a $61.8 million position. Other investors bullish on the company included Deerfield Management, FPR Partners, and Osterweis Capital Management. In terms of the portfolio weights assigned to each position Baker Bros. Advisors allocated the biggest weight to Kodiak Sciences Inc (NASDAQ:KOD), around 2.92% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, dishing out 1.45 percent of its 13F equity portfolio to KOD.

Seeing as Kodiak Sciences Inc (NASDAQ:KOD) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers who sold off their full holdings in the third quarter. Interestingly, Richard Driehaus’s Driehaus Capital dumped the largest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $10.3 million in stock, and Greg Eisner’s Engineers Gate Manager was right behind this move, as the fund cut about $0.6 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Kodiak Sciences Inc (NASDAQ:KOD) but similarly valued. We will take a look at Camping World Holdings, Inc. (NYSE:CWH), Alkermes Plc (NASDAQ:ALKS), Tripadvisor Inc (NASDAQ:TRIP), Sanderson Farms, Inc. (NASDAQ:SAFM), Acadia Healthcare Company Inc (NASDAQ:ACHC), Wyndham Destinations, Inc. (NYSE:WYND), and Element Solutions Inc. (NYSE:ESI). This group of stocks’ market valuations resemble KOD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CWH 29 283491 6
ALKS 28 586531 2
TRIP 29 716852 1
SAFM 20 105104 -2
ACHC 24 449899 1
WYND 29 474732 -5
ESI 35 415350 -2
Average 27.7 433137 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $433 million. That figure was $872 million in KOD’s case. Element Solutions Inc. (NYSE:ESI) is the most popular stock in this table. On the other hand Sanderson Farms, Inc. (NASDAQ:SAFM) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Kodiak Sciences Inc (NASDAQ:KOD) is even less popular than SAFM. Our overall hedge fund sentiment score for KOD is 35. 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. Hedge funds clearly dropped the ball on KOD as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on KOD as the stock returned 119.7% since Q3 (through December 14th) and outperformed the market by an even larger margin.

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