Is LRMR A Good Stock To Buy Now?

After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Larimar Therapeutics, Inc. (NASDAQ:LRMR).

Is LRMR a good stock to buy now? Hedge funds were in a pessimistic mood. The number of long hedge fund positions shrunk by 1 lately. Larimar Therapeutics, Inc. (NASDAQ:LRMR) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 20. Our calculations also showed that LRMR 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.

In the financial world there are a multitude of gauges investors employ to value their stock investments. A duo of the less utilized gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass their index-focused peers by a very impressive amount (see the details here).

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

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. With all of this in mind we’re going to check out the key hedge fund action regarding Larimar Therapeutics, Inc. (NASDAQ:LRMR).

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

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LRMR over the last 21 quarters. So, let’s see 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, James E. Flynn’s Deerfield Management has the biggest position in Larimar Therapeutics, Inc. (NASDAQ:LRMR), worth close to $78 million, amounting to 1.9% of its total 13F portfolio. Sitting at the No. 2 spot is RA Capital Management, led by Peter Kolchinsky, holding a $23 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Samuel Isaly’s OrbiMed Advisors, Manfred Yu’s Acuta Capital Partners and Albert Cha and Frank Kung’s Vivo Capital. In terms of the portfolio weights assigned to each position Acuta Capital Partners allocated the biggest weight to Larimar Therapeutics, Inc. (NASDAQ:LRMR), around 3.42% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, dishing out 1.9 percent of its 13F equity portfolio to LRMR.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Two Sigma Advisors. 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 none of the 750+ hedge funds tracked by Insider Monkey identified LRMR as a viable investment and initiated a position in the stock.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Larimar Therapeutics, Inc. (NASDAQ:LRMR) but similarly valued. We will take a look at Adicet Bio Inc. (NASDAQ:ACET), MediciNova, Inc. (NASDAQ:MNOV), Silicom Ltd. (NASDAQ:SILC), Metropolitan Bank Holding Corp. (NYSE:MCB), Orion Energy Systems, Inc. (NYSE:OESX), The ExOne Company (NASDAQ:XONE), and Summit Therapeutics Inc.(NASDAQ:SMMT). This group of stocks’ market caps match LRMR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACET 7 89750 7
MNOV 5 2263 1
SILC 5 7269 0
MCB 7 41108 0
OESX 7 25463 1
XONE 5 3869 3
SMMT 1 1044 -2
Average 5.3 24395 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.3 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $168 million in LRMR’s case. Adicet Bio Inc. (NASDAQ:ACET) is the most popular stock in this table. On the other hand Summit Therapeutics Inc.(NASDAQ:SMMT) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Larimar Therapeutics, Inc. (NASDAQ:LRMR) is more popular among hedge funds. Our overall hedge fund sentiment score for LRMR is 79.5. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on LRMR as the stock returned 46.8% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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