Is MGTA A Good Stock To Buy Now?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Magenta Therapeutics, Inc. (NASDAQ:MGTA).

Is MGTA a good stock to buy now? Money managers were taking a bearish view. The number of long hedge fund bets dropped by 6 recently. Magenta Therapeutics, Inc. (NASDAQ:MGTA) was in 16 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. Our calculations also showed that MGTA 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

William Leland Edwards of Palo Alto Investors

William Leland Edwards of Palo Alto Investors

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 gander at the new hedge fund action surrounding Magenta Therapeutics, Inc. (NASDAQ:MGTA).

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

Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the second quarter of 2020. On the other hand, there were a total of 9 hedge funds with a bullish position in MGTA a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Eli Casdin’s Casdin Capital has the largest position in Magenta Therapeutics, Inc. (NASDAQ:MGTA), worth close to $22.8 million, corresponding to 1% of its total 13F portfolio. Coming in second is Aquilo Capital Management, managed by Marc Schneidman, which holds a $6.5 million position; 0.7% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish include Renaissance Technologies, William Leland Edwards’s Palo Alto Investors and Rick Slocum’s Harvard Management Co. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to Magenta Therapeutics, Inc. (NASDAQ:MGTA), around 1.02% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, designating 0.79 percent of its 13F equity portfolio to MGTA.

Because Magenta Therapeutics, Inc. (NASDAQ:MGTA) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of funds that slashed their full holdings in the third quarter. Interestingly, Panayotis Takis Sparaggis’s Alkeon Capital Management dumped the largest stake of all the hedgies tracked by Insider Monkey, totaling close to $4.5 million in stock. Oleg Nodelman’s fund, EcoR1 Capital, also cut its stock, about $3.4 million worth. These transactions are important to note, as total hedge fund interest fell by 6 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Magenta Therapeutics, Inc. (NASDAQ:MGTA) but similarly valued. These stocks are Ituran Location and Control Ltd. (NASDAQ:ITRN), City Office REIT Inc (NYSE:CIO), Blink Charging Co. (NASDAQ:BLNK), Seneca Foods Corp (NASDAQ:SENEA), Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), China Distance Education Hldgs Ltd (NYSE:DL), and AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG). This group of stocks’ market valuations are similar to MGTA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ITRN 7 43042 -2
CIO 15 29144 2
BLNK 5 12486 3
SENEA 11 32029 2
AOSL 11 37899 1
DL 3 6280 0
AMAG 11 139323 -3
Average 9 42886 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $43 million in MGTA’s case. City Office REIT Inc (NYSE:CIO) is the most popular stock in this table. On the other hand China Distance Education Hldgs Ltd (NYSE:DL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Magenta Therapeutics, Inc. (NASDAQ:MGTA) is more popular among hedge funds. Our overall hedge fund sentiment score for MGTA is 70.8. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Unfortunately MGTA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MGTA were disappointed as the stock returned 5.3% since the end of the third quarter (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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