With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Merus N.V. (NASDAQ:MRUS).
Is MRUS a good stock to buy now? Merus N.V. (NASDAQ:MRUS) was in 13 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 15. MRUS investors should pay attention to a decrease in hedge fund sentiment of late. There were 15 hedge funds in our database with MRUS holdings at the end of June. Our calculations also showed that MRUS 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.
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 take a peek at the fresh hedge fund action encompassing Merus N.V. (NASDAQ:MRUS).
Do Hedge Funds Think MRUS Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MRUS 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.
The largest stake in Merus N.V. (NASDAQ:MRUS) was held by Biotechnology Value Fund / BVF Inc, which reported holding $67.7 million worth of stock at the end of September. It was followed by Baker Bros. Advisors with a $24.5 million position. Other investors bullish on the company included Driehaus Capital, Hillhouse Capital Management, and Cormorant Asset Management. In terms of the portfolio weights assigned to each position Biotechnology Value Fund / BVF Inc allocated the biggest weight to Merus N.V. (NASDAQ:MRUS), around 3.69% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, dishing out 1.33 percent of its 13F equity portfolio to MRUS.
Due to the fact that Merus N.V. (NASDAQ:MRUS) has experienced a decline in interest from the smart money, it’s easy to see that there is a sect of funds that decided to sell off their full holdings heading into Q4. Intriguingly, Manfred Yu’s Acuta Capital Partners sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at about $7.4 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund cut about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Merus N.V. (NASDAQ:MRUS) but similarly valued. We will take a look at Franks International NV (NYSE:FI), Prevail Therapeutics Inc. (NASDAQ:PRVL), Intelligent Systems Corporation (NYSE:INS), Daseke, Inc. (NASDAQ:DSKE), ANI Pharmaceuticals Inc (NASDAQ:ANIP), Hemisphere Media Group Inc (NASDAQ:HMTV), and Luxfer Holdings PLC (NYSE:LXFR). This group of stocks’ market caps are closest to MRUS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $120 million in MRUS’s case. Prevail Therapeutics Inc. (NASDAQ:PRVL) is the most popular stock in this table. On the other hand Hemisphere Media Group Inc (NASDAQ:HMTV) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Merus N.V. (NASDAQ:MRUS) is more popular among hedge funds. Our overall hedge fund sentiment score for MRUS is 79. 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 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on MRUS as the stock returned 50.3% since the end of September (through 12/8) 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.