Is MORF A Good Stock To Buy Now?

In this article you are going to find out whether hedge funds think Morphic Holding, Inc. (NASDAQ:MORF) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is MORF a good stock to buy now? Morphic Holding, Inc. (NASDAQ:MORF) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 7. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. MORF investors should pay attention to an increase in enthusiasm from smart money recently. There were 7 hedge funds in our database with MORF holdings at the end of June. Our calculations also showed that MORF 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.

If you’d ask most investors, hedge funds are seen as underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds trading at present, Our researchers hone in on the aristocrats of this club, approximately 850 funds. It is estimated that this group of investors control most of the hedge fund industry’s total capital, and by shadowing their top investments, Insider Monkey has unsheathed several investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Oleg Nodelman EcoR1 Capital

Oleg Nodelman of EcoR1 CapitalOleg Nodelman

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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 take a look at the fresh hedge fund action encompassing Morphic Holding, Inc. (NASDAQ:MORF).

How are hedge funds trading Morphic Holding, Inc. (NASDAQ:MORF)?

Heading into the fourth quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in MORF over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, EcoR1 Capital held the most valuable stake in Morphic Holding, Inc. (NASDAQ:MORF), which was worth $77.6 million at the end of the third quarter. On the second spot was Perceptive Advisors which amassed $13.3 million worth of shares. Cormorant Asset Management, Point72 Asset Management, and Alkeon Capital Management 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 EcoR1 Capital allocated the biggest weight to Morphic Holding, Inc. (NASDAQ:MORF), around 5.54% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, dishing out 0.26 percent of its 13F equity portfolio to MORF.

As industrywide interest jumped, some big names were leading the bulls’ herd. Cormorant Asset Management, managed by Bihua Chen, established the biggest position in Morphic Holding, Inc. (NASDAQ:MORF). Cormorant Asset Management had $6.8 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $5 million position during the quarter. The only other fund with a new position in the stock is David Rosen’s Rubric Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Morphic Holding, Inc. (NASDAQ:MORF) but similarly valued. We will take a look at Cango Inc. (NYSE:CANG), Diversified Healthcare Trust (NASDAQ:DHC), General American Investors Company, Inc. (NYSE:GAM), Sprott Inc. (NYSE:SII), Alector, Inc. (NASDAQ:ALEC), QuinStreet Inc (NASDAQ:QNST), and Acutus Medical, Inc. (NASDAQ:AFIB). This group of stocks’ market values match MORF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CANG 2 254 1
DHC 12 25000 -2
GAM 4 28358 1
SII 14 103508 6
ALEC 24 124557 -5
QNST 16 173724 -4
AFIB 16 366158 16
Average 12.6 117366 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $112 million in MORF’s case. Alector, Inc. (NASDAQ:ALEC) is the most popular stock in this table. On the other hand Cango Inc. (NYSE:CANG) is the least popular one with only 2 bullish hedge fund positions. Morphic Holding, Inc. (NASDAQ:MORF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MORF is 49.6. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on MORF as the stock returned 14.1% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.

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