Is Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) a healthy stock for your portfolio? The smart money is turning bullish. The number of bullish hedge fund positions rose by 7 in recent months. Our calculations also showed that MIRM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MIRM was in 7 hedge funds’ portfolios at the end of the third quarter of 2019. There were 0 hedge funds in our database with MIRM positions at the end of the previous quarter.
Video: Click the image to 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
James E. Flynn of Deerfield Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s view the fresh hedge fund action regarding Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM).
What have hedge funds been doing with Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7 from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in MIRM 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.
The largest stake in Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) was held by Frazier Healthcare Partners, which reported holding $35.9 million worth of stock at the end of September. It was followed by Deerfield Management with a $34.7 million position. Other investors bullish on the company included Rock Springs Capital Management, Baker Bros. Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Frazier Healthcare Partners allocated the biggest weight to Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM), around 11.22% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, designating 1.41 percent of its 13F equity portfolio to MIRM.
Consequently, specific money managers were leading the bulls’ herd. Frazier Healthcare Partners, managed by Alan Frazier, created the most valuable position in Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM). Frazier Healthcare Partners had $35.9 million invested in the company at the end of the quarter. James E. Flynn’s Deerfield Management also initiated a $34.7 million position during the quarter. The other funds with brand new MIRM positions are Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Julian Baker and Felix Baker’s Baker Bros. Advisors, and Israel Englander’s Millennium Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) but similarly valued. These stocks are LCNB Corp. (NASDAQ:LCNB), Apyx Medical Corporation (NASDAQ:APYX), Spok Holdings Inc (NASDAQ:SPOK), and InnerWorkings, Inc. (NASDAQ:INWK). This group of stocks’ market caps are closest to MIRM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LCNB | 1 | 3680 | 0 |
| APYX | 8 | 34126 | 0 |
| SPOK | 11 | 26631 | 0 |
| INWK | 14 | 39181 | 0 |
| Average | 8.5 | 25905 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $84 million in MIRM’s case. InnerWorkings, Inc. (NASDAQ:INWK) is the most popular stock in this table. On the other hand LCNB Corp. (NASDAQ:LCNB) is the least popular one with only 1 bullish hedge fund positions. Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MIRM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MIRM investors were disappointed as the stock returned -28.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.